Budget 2021: India Plans To Privatise Two Public Sector Banks

The government will sell stake in at least two public sector banks as part of its privatisation plan in the next financial year.

The government will bring necessary legislative changes in this parliamentary session to enable this divestment plan, Union Finance Minister Nirmala Sitharaman said during her budget speech on Feb. 1, 2021. She, however, did not specify which banks the government was looking to sell stake in, or how much it would divest.

In 2019, it had sold a majority stake in IDBI Bank to Life Insurance Corporation of India, effectively privatising the lender.

Besides the two banks, the government will divest stake in a general insurance company. The proposed initial public offering for LIC, as part of the Rs 1.75-lakh-crore disinvestment plan, will also conclude in FY22.

The government expects to raise Rs 1 lakh crore from disinvestment in public sector banks and financial institutions in FY22, up from Rs 32,000 crore revised estimates of 2020-21.

This is another attempt by the government to bring in public sector banking reforms. In August 2019, it had announced merger of 10 public sector banks into four, effective April 1, 2020.

Punjab National Bank acquired Oriental Bank of Commerce and United Bank of India; Union Bank of India acquired Andhra Bank and Corporation Bank; Allahabad Bank merged with Indian Bank, while Syndicate Bank was merged with Canara Bank.

Separately, in the budget for FY22, the government also announced a recapitalisation plan worth Rs 20,000 crore for state-run banks.

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