Govt mulls bank merger before privatisation: report

23 Feb 2021


The government is going ahead with plans to privatise at least two state-run banks, but only after completing the merger process for public sector banks initated earlier, says report.

Finance minister Nirmala Sitaraman, in her budget speech, had announced that two state-run banks will be privatised in the next fiscal.
A media report said the government will look into the balance sheet of banks in the first quarter of next financial year and may consider merger of two public sector banks, before going ahead with privatisation.
However, government has not so far finalised the banks for privatisation and this would be done only after a proper assessment of the finances of the banks concerned, the report said.
It may be noted that a working group set up by the Reserve Bank of India (RBI) has last year proposed that large corporate/industrial houses and well-run non-banking financial companies with asset size of Rs50,000 crore and above, including those run by corporates may be allowed as promoters of banks, of course,  after necessary amendments to the Banking Regulation Act.
RBI constituted the Internal Working Group (IWG) on 12 June 2020 to review extant ownership guidelines and corporate structure for Indian private sector banks, inter alia including review of the eligibility criteria for individuals/ entities to apply for banking licence, examination of preferred corporate structure for banks and harmonisation of norms besides a review of norms for long-term shareholding in banks by the promoters and other shareholders.
According to sources in the Finance Ministry, the government has not yet shortlisted any bank so far and it would be done only after examining the balance sheet.
A report in The New Indian Express said the banks for privatisation will be shortlisted after taking into account performance of the Q4 (Jan- March 2021) and Q1 of FY22 ( April to June 2021) after consultation with the RBI.
The two banks proposed to be privatised exclude IDBI Bank, which is already on the privatisation list, the finance minister had tated in her budget speech.
“Other than IDBI Bank, we propose to take up the privatisation of two public-sector banks and one General Insurance company in the year 2021-22,” Nirmala Sitharaman had said.  
However, the two banks proposed to be privatised may not be the “weakest” bank, according to officials.

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