Pause button likely on privatisation of banks?

Mumbai: It appears that hey days of the two public sector banks (PSBs), which were being talked about being privatised until now, are back as the central government developed second thoughts on the move.

After giving it a serious thought to privatise State-owned lenders like Indian Overseas Bank (IOB) and Central Bank of India for quite some time, the government has taken a U-turn on its plan and now there is no talk of their disinvestment.

Rather, going a step ahead, Reserve Bank of India (RBI) is now mulling to bring Central Bank of India out of the regime of prompt corrective actions (PCA). Once the bank falls under PCA regime, it has to face a number of restrictions like it can't release any advertisement to the media.

A senior official of the bank told Bizz Buzz on condition of anonymity that the bank's performance for past three quarters in a row has been robust as it has been registering net profit of over Rs200 crore in each of the quarters of the period under review. As per the sources in the finance ministry, RBI is likely to move Central Bank out of PCA if it reports encouraging financial results for the last quarter of just concluded financial year (FY22). The bank's total capital adequacy ratio (CAR) currently stands at 15.87 per cent and its net NPA was as low as 4.39 per cent. The bank will be declaring its annual financial result on May 9.

"The government has moved amendments to the Banking Acquisition and Transfer of Undertakings 1969 and 1980 which has to be passed by Parliament which has not been taken up so far. It is in this background that there will likely be a pause in privatisation effort of the two state-run banks," says a former head of a state-run bank requesting anonymity.

Moreover, there has not been any official confirmation as to which are the two PSBs to be privatised. However, it has been speculated that IOB and Central Bank of India are the two likely candidates for the privatisation drive. It is also gratifying to note that the performance of all PSBs, including IOB and Central Bank of India, have improved considerably in spite of last two years of Covid. It is also nice to know that PSBs are given more empowerment and level playing field as that of private banks and more space and time to blossom further from the current level of performance before any of them picked up for privatisation, he added.

Rather than going for privatisation of the two state-run lenders, now the government is working on a plan to shed its stake in IDBI Bank in which LIC currently holds a majority of shares.