Govt likely to overhaul banking sector, shortlists four banks for privatisation: Report
New Delhi | Jagran Business Desk: In a move to raise the revenues, the government has reportedly shortlisted four mid-sized banks for privatisation under a new push to sell state assets. According to a report by news agency Reuters, quoting three government sources, the four banks shortlisted for privatisation are Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India. Two of those banks will be selected for sale in the 2021/2022 financial year which begins in April, the sources added.
Privatisation of the banking sector, which is dominated by state-run behemoths with hundreds of thousands of employees, is politically risky because it could put jobs at risk but Prime Minister Narendra Modi's administration aims to make a start with second-tier banks.
The sources said that the government is aiming to privatise mid-sized banks in the first round of privatisation to test the waters, and it could also look at some big banks in the coming years. However, the government will continue to hold the majority stake in India's largest lender State Bank of India, which is seen as a 'strategic bank' for implementing initiatives such as expanding rural credit.
The government is also considering overhauling the banking sector which is reeling under the heavy load of non-performing assets, which is expected to rise further once the banks are permitted to categorise loans that soured during the coronavirus pandemic as bad.
The Reuters report further stated that the government wants to privatise four mid-sized banks initially in this fiscal year, but the officials have advised caution fearing resistance from unions representing the employees.
Bank of India has a workforce of about 50,000 and Central Bank of India has 33,000 staff, while Indian Overseas Bank employs 26,000 and Bank of Maharashtra has about 13,000 employees, according to estimates from bank unions. Bank of Maharashtra's smaller workforce could make it easier to privatise and therefore potentially one of the first to be sold, the sources said.
"Factors like number of employees, the pressure of the trade unions and political repercussions would impact a final decision," the source said, noting that the privatisation of a particular bank could be subject to change at the last moment due to these factors.
The government hopes that the Reserve Bank of India, the country's banking regulator, will soon ease lending restrictions on Indian Overseas Bank after an improvement in the lender's finances that could help its sale.
Posted By: Talibuddin Khan