The Niti Aayog has reportedly suggested that the Indian Overseas Bank and the Central Bank of India be privatized. But a key panel to endorse the names has yet to make a final call. The cabinet must also ratify the bill before it is submitted to the House of Representatives.
The government is unlikely to introduce a bill to facilitate the privatization of two public banks (PSBs) during Parliament’s current budget session, official sources told FE.
The Niti Aayog has reportedly suggested that the Indian Overseas Bank and the Central Bank of India be privatized. But a key panel to endorse the names has yet to make a final call. The cabinet must also ratify the bill before it is submitted to the House of Representatives. The budget session will last until April 8.
The Banking Law Act, 2021, was listed as part of the legislative work ahead of the winter session of the parliament which concluded on December 23, 2021. However, the government postponed the daring plan amid fierce protests from banking unions.
Speculation about the government reviving the proposal gained momentum after recently concluded assembly polls in key states, including Uttar Pradesh. The general secretary of the All India Central Bank Employees’ Federation, BS Rambabu, recently said that staff of all PSBs would go on strike on March 28-29 if the government did not withdraw the privatization proposal.
In the draft bill it may be proposed to lower the requirement of a minimum government interest in PSBs to 26% from 51%. The government may also be open to giving up its entire stake in selected banks in order to then win the interests of investors.
The bill proposes to “make amendments to the Business Acquisition and Transfer Act, 1970 and 1980 and occasional amendments to the Banking Ordinance Act, 1949…”, according to the list of legislative cases for the last winter session of Parliament.
Presenting the 2021-22 budget, Finance Minister Nirmala Sitharaman had announced the privatization of two PSBs and one general insurer, as part of the Centre’s bid to rake in Rs 1.75 lakh crore in divestment receipts. Neither has gotten off the ground so far.
The government has also reduced its divestment proceeds to just Rs 78,000 crore in the revised estimate for the current fiscal year. Even this lowered target is likely to be missed, as the initial public offering of state-run LIC is likely to be pushed into next fiscal year due to market turmoil in the wake of the Russia-Ukraine conflict.
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