New Delhi: Two state-owned banks being taken up by the government for privatization are likely to come out with an attractive voluntary retirement scheme (VRS) to get rid of the extra flap, sources said.
Finance Minister Nirmala Sitharaman announced on February 1 during the unveiling of Budget 2021-22 that the government is proposing to tackle the privatization of two public sector banks (PSBs) and one general insurance company.
A VRS would make them lean and suitable for takeover by private sector entities that would like to enter the banking space, the sources said. NITI Aayog, who has entrusted the task of identifying suitable candidates for privatization, has recommended names for a high-level panel chaired by Rajiv Gauba, Cabinet Secretary.
Central Bank of India, Indian Overseas Bank, Bank of Maharashtra and Bank of India are among the names that can be considered by the Core Group of Secretary on Disinvestment for privatization.
After approval of the core group of secretaries, the final names will go to the Alternative Mechanism (AM) for approval and eventually to Cabinet for the final nod.
Changes on the regulatory side to facilitate privatization will begin after the cabinet is approved.
Meanwhile, the regulator of the banking sector, RBI, also said that he is in talks with the government about the privatization of PSBs.
During the current financial year, the government budgeted £ 1.75 million of the sale of stake in public sector enterprises and financial institutions. The amount is lower than the record budget of 2.10 million Rakh, which was obtained in the last fiscal amount from CPSE non-investment.
In addition to PSBs, the government also plans to leave the LIC-controlled IDBI Bank.
Last month, the Union Cabinet approved in principle for strategic disinvestment, together with the transfer of management control in IDBI Bank.
The central government and the LIC together own more than 94 percent of IDBI Bank. LIC, currently the promoter of IDBI Bank with management control, has a 49.21 percent stake.
Meanwhile, banking unions opposed the process of privatizing banks and went on strike for two days in March under the auspices of the United Forum of Bank Unions. In addition, they are taking to social media to register their protest against privatization, calling it a retrograde move by the government.
Recently, the Federation of Bank of India Officers Associations launched a social media campaign against the proposed privatization movement, with large participation from all stakeholders, said Sunil Kumar, the union’s general secretary.
He also said that public sector banks have always played a key role in the success of all government schemes such as demonization, Jan-Dhan Yojana, Mudra Yojana and Prime Minister SVANidhi.
PSBs have approved 95 per cent of the total loans under the PM SVANidhi scheme, which aims to offer street vendors loans of up to Rs 10,000 to get their business back on track. COVID-induced closure last year.
Source: Telangana Today