Govt Bank Employees To Be ‘Shifted’ To Other Banks Before Privatization? NPAs Can Be Waived Off!

The government might hive off the non-performing loans of the 2 public sector banks that be chosen for privatization and transfer some of their staff to alternative state-run lenders in a bid to make them eye-catching for consumers.

The government is probably going to think about solely banks that weren’t a part of the recent consolidation, which might exclude Punjab National Bank, Bank of Baroda, Canara Bank, and State Bank of India from the privatization process. A senior government official told that they could clean up the balance sheet and then offer the banks for sale if it could help to get better value.

Finance Minister Nirmala Sitharaman said in the budget FY22 that the government aims to denationalize 2 public sector banks and one state-run general insurance the next year.

The finance ministry is probably going to carry discussions with Niti Aayog over the subsequent ten days to spot the candidates for privatization. The government will then begin the foundation of the plan, which will include legislative changes and communicating with the Reserve Bank of India on criteria for buyers. The RBI working group had suggested in November that large corporate houses should be allowed to own banks by amending the Banking Regulation Act.

Employees’ Interest

Employee interests will also be considered and they may be allowed to switch to another PSB before privatization.

Sitharaman told ET in an interview published on February 13 that the interests of all categories including staff would be monitored. “We have to negotiate with those who want to bid to see that workers’ interests are protected, not only for today but also if the commitment is to ensure that their pensions will be paid, it will have to be something I will keep. … We have to talk to everyone,” She said.

Non-consolidation banks most well-liked

Banks that were a part of the consolidation exercise are probably be excluded from the privatization method as they’re still managing integration problems and privatizing them would increase difficulties.

“Consolidation exercise will be carried out at various levels including branches, ATMs, people, business, software,” said the officials, adding that was incomplete in some cases due to the disruption caused by Covid-19.

In August 2019, government decided to bring down the number of PSBs in the country to 12 from 27 by announcing merger of 10 public sector banks into four big ones.

Following are the mergers:-

  • Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank
  • Syndicate Bank was merged with Canara Bank
  • Allahabad Bank with Indian Bank
  • Union Bank of India with Andhra Bank & Corporation Bank.

Indian Overseas Bank, Central Bank of India and UCO Bank of the 12 PSBS are under the RBI’s Prompt Corrective Action framework, a set of guidelines for lenders that become undercapitalized due to poor asset quality or turned vulnerable due to loss of profitability.

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