Punjab & Sind Bank, Bank of Maharashtra, Bank of India Will Be Sold To Private Firms? What Experts Are Saying?

The market analysts are considering the Punjab & Sind Bank, Bank of Maharashtra and Bank of India as the next candidates for the bank privatization plan.

Why Would This Happen?

The finance minister, Nirmala Sitharaman said the government planned to privatize two state-run banks, other than IDBI Bank, during her Budget speech.

So, the likely candidates will be from the pool of banks which were not part of the merger process, according to the analysts. 

Prior to this, the government had earlier allowed the merger of 13 banks into five banks.

Punjab and Sind Bank and Bank of Maharashtra looked probable candidates for privatization, according to Anil Gupta, the vice-president and sector head, financial sector ratings, ICRA. 

PCA Framework Bank

Further, he said that the six banks kept out of the merger includes Indian Overseas Bank, Central Bank and UCO Bank are under PCA (prompt corrective action).

 After a massive asset quality deterioration, losses in the books and lower capital levels, the Reserve Bank of India had kept the three banks in the PCA framework.

These PCA banks were unlikely to be offered for privatization due to poor investor demand, added Gupta.

Testing Waters With Small Bank

Apart from the State Bank of India and five merged banks, there are six public sector banks in the banking system currently.

The six banks are Bank of India, Punjab and Sind Bank, Bank of Maharashtra, Indian Overseas Bank (IoB), Central Bank of India and Uco Bank. 

So far, the government was unlikely to consider the privatization of the Bank of India due to its large size, Gupta said.

According to him, “the government may want to test the water with smaller banks first,”.

Government Wants More Public Sector Banks

Nirmala Sitharaman said the government wanted more public sector banks that are functionally strong, professionally managed and can meet the demands of growing aspirational India, in an interview with CNN News 18.

She added, “If I am going to be sitting around with such public sector banks which are just not in a mood or a position to stand up, is it right to pour tax-payers money into such banks? When there may be buyers who can buy and run it efficiently,” she said.

Already, the government has proposed to introduce required legislative amendments for the privatization of two PSBs in the Budget session itself.