India looks forward to privatising most public sector banks: Report
India is planning to privatise most of the public sector banks to reduce the number of government-owned lenders to just five as part of an overhaul of the banking industry, government and banking sources said.
According to a government official “The first part of the plan will be to sell majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank, leading to effective privatisation of these state-owned lenders”. “The idea is to have 4-5 government-owned banks,” added the senior government official. At present India has 12 nationalised public sector bank.
According to a government official, such a plan will be laid out in a new privatisation proposal the government is currently formulating, and this would be put before the cabinet for approval. The government is working on a privatisation plan to raise money by selling assets in non-core companies and sectors. This is done to help the country’s slow economic growth caused by the COVID 19 pandemic.
Several government committees and the Reserve Bank of India have also supported this move. They recommended that India should have not more than five state-owned banks. Previous year union government merged 10 the state-owned banks into four.
“The government has already said that there will be no more mergers (between state-owned banks) so the only option for them is to divest stakes,” a senior official at a state-owned bank said.
But the divestment plans may not work in this financial year due to unfavourable market conditions.
But the government’s privatisation plan is being worked out when the banks may face rising bad loans later this financial year because of the fallout from the coronavirus crisis. India expects bad loans at its banks could double after the crisis brought the economy to a standstill. Indian banks already had 9.35 trillion rupees ($124.38 billion) of soured loans, equivalent to about 9.1% of their total assets at the end of September 2019.