The government is likely to retain a 26% stake in for the first few years in the two state-run banks set to be privatised as part of the government’s disinvestment drive. Investor interest and market conditions will drive the magnitude of the stake sale.
The government will introduce a bill in the upcoming Winter Session of Parliament to make the requisite changes for the privatisation of banks. It was reported that government think tank Niti Aayog has shortlisted the Central Bank of India and Indian Overseas Bank for disinvestment. An official announcement is awaited on the matter.
A government official told Economic Times that regulatory approvals required for the privatisation of the public sector banks will be given during the winter session but the state will retain some stake at least for a few years and dilute it at a later stage.
A similar approach is likely to be followed for state-owned heavy equipment manufacturer BEML Limited in which the government is relinquishing 26% of its stake along with management control, the report added.
The Banking Law Amendment Bill 2021 will seek for appropriate changes in to the Banking Companies Acquisition and Transfer of Undertakings Act, 1970 and 1980, and incidental amendments to the Banking Regulation Act, 1949 in order to facilitate the sale of the government’s stake in two public banks.
Finance minister Nirmala Sitharaman had announced the government’s decision to privatise two public banks as part of the disinvestment drive during the budget speech in February 2021. “Other than IDBI Bank, we propose to take up the privatisation of two public sector banks and one general insurance company in the year 2021-22,” she had said.
The report quoting the unnamed government official said the extent of stake sale in IDBI will be finalised at the time of restructuring transaction in consultation with the Reserve Bank of India. He also added that discussions are also being underway with RBI for relaxation in ownership and management criteria. It is aimed at broadening the investor pool of bidders to include non-banking finance companies operated by corporate houses.
