The Finance Ministry is working to expedite the sale of stakes in four state-owned banks — IDBI Bank, Bank of Maharashtra, Punjab & Sind Bank and UCO Bank — with the aim of completing the disinvestment process in the current fiscal, said an official.
Finance Minister Nirmala Sitharaman held a meeting on Tuesday with all Secretaries in the Ministry to discuss this issue, the official, who spoke on the condition of anonymity, added.
The government is looking to divest its stakes in multiple public sector companies at a time when its finances have taken a hit from significant shortfalls in tax revenue amid the economic fallout of the COVID-19 pandemic. The four banks mentioned were the only prospects currently being considered for divestment in the banking sector, added the official.
“Work has started on these four, and the target is to complete it within this financial year, by March 2021,” said the official. The Centre holds majority stakes in all four banks through direct and indirect holdings.
The Prime Minister’s Office wrote a letter to the Finance Ministry earlier this month asking it to expedite the sale of stakes in these lenders, Reuters reported on Tuesday, citing a government source with direct knowledge of the matter.
‘Strategic sectors’
The Centre’s Aatmanirbhar Bharat Abhiyan, announced in May as a stimulus package in the wake of the pandemic, had promised a new Public Sector Enterprise Policy that would notify specific strategic sectors in which no more than four PSU players would be allowed, with the rest being privatised, merged or brought under holding companies. At the time, some economists had cautioned that the government could struggle to find buyers for its PSU stakes at a time of global recession.
In June, Chief Economic Advisor Krishnamurthy Subramanian asserted that banking would be categorised as a strategic sector, meaning that apart from four public sector banks, all others would have to be privatised or merged.
Earlier this month, a senior Finance Ministry official said that a proposal on strategic sectors was being prepared and would be taken to the Cabinet soon. The official also confirmed that the Centre intended to go ahead with the proposed sale of its stake in IDBI Bank.
The government currently owns about 47% stake in IDBI Bank. In 2019, state-run insurance behemoth LIC completed acquisition of a 51% controlling stake in the lender, and infused ₹21,624 crore into it.
Shares of IDBI Bank rose 2.7% to close at ₹39.65 on the BSE on Tuesday.