NRI Dunia
Think Outside The Box

Wheels set in motion for privatisation of four PSBs

Prime Minister Narendra Modi’s office has asked officials to speed up the process of trimming government stakes in at least four primarily state-owned banks within the current fiscal, according to two officials familiar with the discussions.

The sources said the four lenders are Punjab & Sind Bank, Bank of Maharashtra, UCO Bank and IDBI Bank, in which the government owns majority stakes through direct and indirect holdings.

New Delhi wants to overhaul the banking sector and is also pushing the privatization of banks and other state-run companies to help raise funds for budgeted spending amid a fall in tax collections due to the economic downturn caused by the pandemic.

The PMO wrote a letter to the Finance Ministry earlier this month asking it to expedite the process of privatising these lenders in the current financial year, said one government source with direct knowledge of the matter.

“The process of privatising the banks has started,” the person said, adding some consultations had already taken place. The PMO and lenders did not immediately respond to requests for comment, while the Finance Ministry declined to comment.

The sources, who declined to be named as the discussions are private, noted the government’s timeline is aggressive and might be a challenge given the current market conditions.

Currently, there are a dozen public sector banks in addition to IDBI, in which the government owns 47.11% while the state-owned insurance behemoth Life Insurance Corporation owns 51% stake.