Public sector banks that were not part of the consolidation process are going slow on their plans to monetise assets as part of their capital-raising efforts. These banks have decided to wait and see whether they are candidates for the government’s privatisation plan before initiating any stake sale.
The thinking is that private investors might see more value in a bank that has other businesses that can be grown. Last week, Central Bank of India allowed a deal to sell its housing finance arm Cent Bank Home Finance to fall through by not going ahead with the transaction before the long-stop date of March 31, 2021.
In terms of the deal, the public sector lender would have received Rs. 160 crore. Similarly, Bank of India has been looking to sell stake in its life insurance arm, Star Union Daiichi. In good times, public sector banks have made investments in financial sector entities. But the Reserve Bank of India is now reluctant to grant permission to banks to set up subsidiaries.