Govt Wants To Sell PSU Banks To Foreign Investors, NBFCs Like Bajaj Finance, Shriram Capital

Reportedly, the Centre and the Reserve Bank of India (RBI) are having discussions over a special framework for facilitating privatization of state-run banks.

 Expedite The Disinvestment Process

 It seems that they started accepting bids from corporate-owned shadow lenders such as Bajaj Finance, Shriram Capital, and Cholamandalam Finance, as well as overseas sovereign wealth funds (SWFs) in an attempt to expedite the disinvestment of public sector banks (PSBs).

Once approval is done, these changes would make it easy for India Inc. to own banks, which is considered to be a highly controlled area.

How Is This Helpful?

Prior to this, the Finance Minister Nirmala had announced the privatisation of PSBs as part of a disinvestment exercise to garner Rs 1.75 lakh crore while presenting the Budget for 2021-22 in February.

Basically, the proposed framework could include relaxations in ownership and management standards for these lenders to allow a wider pool of bidders such as non-banking finance companies (NBFCs). 

Along with that they could also participate in the disinvestment process if the financial services business accounts for more than 60 percent of the turnover of these groups, according to the sources. 

In simple words, the companies such as Tata Capital, L&T Finance or Aditya Birla Group are being left out.

Apart from this, the apex bank could also ask for protections such as asking for shielding the nonfinancial and financial services businesses of corporate groups. 

Attracting More Investment

“There is a view that an independent and self-contained dispensation for privatisation of public sector banks will help attract more investors and expand the bidder universe for these assets,” as per the sources. 

Beside this, the proposal also considers the easing of norms to trim promoter stakes and relaxations in curbs on voting rights of promoter shareholders as well as allowing the involvement of SWFs of friendly countries.

So far, the negotiations are ongoing with the central bank over issues related to the IDBI Bank disinvestment process as this could evolve into a common outline for privatisation of all state-controlled banks.

“Some of these suggestions were already recommended by an internal working group set up by the RBI itself. We have sought further clarity, and made some suggestions based on the same,” official said.

Before this, the banking regulator had released an internal working group review of ownership guidelines for private sector banks, including their corporate structure last year.