Centre starts discussions on privatisation of public sector banks: Report

The Centre has started work on the privatisation of public sector banks (PSBs) in line with the disinvestment plans announced by Finance Minister Nirmala Sitharaman in Budget 2020.

A select group of government functionaries has started discussions on a proposal based on suggestions from the NITI Aayog, sources told The Economic Times. The move aims to hinder a “culture of bailouts by the taxpayer,” it said.

While discussions on de-nationalisation are on, no decision has been made yet, sources said, adding: “The discussions have to get more intense as the Bank Nationalisation Act has to be amended before going ahead with the next step.”

Moneycontrol could not independently verify the report.

Government think-tank NITI Aayog’s suggestions include allowance of ‘long term private capital’ in the banking sector, besides provision of banking licenses to select industrial houses under strict qualifications.

At present, large business houses can only infuse 10 percent in banks and do not qualify as ‘eligible entities’ under the Reserve Bank of India’s (RBI) universal banking license norms. India began nationalising banks in 1969, if this goes through it will be a sharp reversal from the legacy.

Considerations at present include Indian Overseas Bank, Punjab & Sind Bank and Bank of Maharashtra. These were not included in the 10-PSB mergers already underway – aimed at raising PSB competitiveness.

PSBs are governed and regulated by the RBI under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.