Central Bank, Indian Overseas Bank Will Be Sold To Private Firms; Staff Will Be Reduced Via VRS

The govt will bring in amendments to the Banking Regulations Act and Banking Law Act to move ahead with the privatisation of Central Bank of India and Indian Overseas Bank.

Both banks were shortlisted by NITI Ayog for divestment. 

Background

In this year’s Union Budget, Finance Minister Nirmala Sitharaman had said that the Centre plans on privatisation of 2 public sector banks (PSBs) in 2021-22. 

NITI Ayog has been given the responsibility of coming up with candidates to either privatise, merge or make subsidiaries of other PSUs. 

The think tank submitted its report to the Core Group of Secretaries on Disinvestment with the names of the candidates.

The Process

The Core Group is headed by the Cabinet Secretary and consists of economic affairs secretaries of revenue, expenditure, corporate affairs, legal affairs, Department of public enterprises, secretary department of Investment and Public Asset Management (DIPAM) and the secretary of administrative department.

After the Group gives its approval, the report will then go to Alternative Mechanism (AM) for their decision. 

The final step is when the PM-headed Cabinet gives its final nod.

In Response To Workers’ Protests

Sitharaman said in response to protests held by to-be-privatised bank workers that their interests will be protected and issues regarding salaries or scale or pension will be taken care of as well.

She explained that the move to privatise these banks is so that they could become bigger, citing SBI as an example. 

She stated that the country needs its banks to “be able to scale up” and meet the “aspirational needs of this country”.

The decision was not a hastily made one, as a lot of thought and deliberation had gone into it.

VRS Coming Soon

The two banks up for privatisation will roll out a Voluntary Retirement Scheme (VRS) soon. 

The VRS will help the banks trim the fat in terms of excess workforce, making it “fit for takeover by the private sector entities that are keen to enter the banking space”.

In other plans, the Centre is also planning to exit IDBI Bank which it has a stake in along with LIC. 

The Union Cabinet gave in-principle approval for its strategic disinvestment and for control of its management to be transferred.

The Indian govt and LIC combined own 94% of equity of IDBI Bank. LIC itself owns a 49.21% as promoter with management control.

Govt Bank Employees Threaten Indefinite Strike Over Privatization, Job Security