Bank privatisation not in one go, govt may retain at least 26% in 2 PSBs

The government may not fully exit from the two state-run banks that are to be privatised and instead retain at least a 26% stake for the first few years. A senior official said the extent of the stake sale will depend on interest from investors and market conditions.

The government will introduce a bill in the winter session of parliament to make the changes needed before privatising the two banks. The Central Bank of India and Indian Overseas Bank have reportedly been shortlisted by Niti Aayog for disposal. However, a final decision is yet to be taken.

“The upcoming bill will clear decks for regulatory approvals required for privatisation of two PSBs (public sector banks) but we may like to retain some stake and dilute it at a later stage,” the official said, reasoning that the government may like to cash in on the upside in valuation after the stake sale.

Banking on Better Valuation
A similar strategy is being pursued in the case of state-run BEML (formerly Bharat Earth Movers Ltd), where the government is divesting 26% equity along with management control of the Bengaluru-based company. The government has a 54.03% stake in the company. “The required changes in the (banking) laws have been vetted by the law ministry. We will soon take it to the cabinet so that it can be taken up by parliament,” said the official cited above.

The Banking Laws Amendment Bill, 2021, will make changes to the Banking Companies Acquisition and Transfer of Undertakings Act, 1970 and 1980, and incidental amendments to the Banking Regulation Act, 1949.

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