As banking is set to see in strategic sector fitting for discretionary under privatisation within a new set of a policy being unveiled, the Niti Aayog has produced a blueprint with some key factors with consolidated in consideration.
The think tank has asked the government to regain control over country’s top four state-run lenders- State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda even after recommended that three state running banks Punjab and Sindh Bank, Bank of Maharashtra and UCO bank be privatised under priority basis.
The government stated that a maximum of 4 State-run players would be allowed in each of the strategic sectors and a list of which will be set before the cabinet for clearance.
And for the remaining five such as Bank of India, Indian Overseas Bank, Indian Bank, Central bank the government may either with four large ones to trim its stake in them over a time frame of 26% as per NITI Aayog.
Public sector banks may need massive capital infusion once the validity of the regular relaxations, i.e. the repayment of the moratorium is over. Privatisation of the weak public sector banks would save the government the need to infuse capital every year to keep them afloat.
However, the government would likely to have worked out of a medium-term plan to privatise PSB’s garner maximum from the sale. Between FY-15-20 government has infused 3.2lakh crore to shore up bad loan PSBs. Still, their market eroded substantially before Covid-19 pandemic.
For privatising bank, the government have to repeal the Bank Nationalisation Act 1970. Modi government is trying to unshackle the hold of the public sector by encouraging private banks to acquire government assets.
Recently it revealed the law governing BPCL to pave the way for privatisation and also amend Coal bearing act to allow commercial coal mining by private firms.