Govt Banks Will Be Privatised, Confirms Finance Minister; Govt & RBI Will Create Privatisation Blueprint

Sitharaman announces working with RBI in the process of privatizing two more public banks.
Sitharaman announces working with RBI in the process of privatizing two more public banks.

Last week after the budget meeting, we informed you of the Finance Minister’s plans of conducting the privatisation process for two more public sector banks, besides IDBI Bank, along with two insurance companies, in the upcoming financial year, FY22.

In her budget speech, FM Sitharaman confirmed shifting the IPO process for LIC to FY22, along with introducing privatisation processes for two PSBs and two insurance companies, while allocating Rs 20,000 crore for recapitalisation of banks.

The FM said the government would be working in conjunction with the Reserve bank of India to execute the bank privatisation plan announced in the budget.

She also added that there persists absolutely no plan of forming any bank investment company for housing government stakes in banks.

No Details Disclosed on Banks to be Privatised

In the Union budget meeting presented last week, Siathraman announced privatising 2 public sector banks, as part of the Government’s disinvestment plan.

However, bank unions disapproved of it.

When asked about the proposal by ET, she said, “The details are being worked out. I have made the announcement but we are working together with the RBI.”

She declined on giving any specific details about the two entities chosen for privatisation.

Bad Bank Proposal

A bad bank is a bank set up to buy the bad loans and other illiquid holdings of another financial institution so that the original institution may clear its balance sheet.

When asked about bad banks, Sitharaman said the government may have to give some guarantee for the National Asset Reconstruction Company.

She stressed that this solution has come from the banks itself and they will be the bodies leading this too.

She added that the NPAs of banks, which need to be transferred to the National ARC, have continually been mismanaged in the past.

However, this time, there shall be no “phone banking” entertained, giving undue advantage to benefactories from New Delhi.

She also stated that there hasn’t been any proposal put forward on the Bank Investment Company (BIC).

Sitharaman also projected confidence in achieving budgetary estimates of Rs 1.75 lakh crore from  divestments and said the government targets receiving about Rs 30,000 crore from the newly introduced agricultural infrastructure cess.

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