Cabinet secretary-led panel holds crucial meeting on privatisation of two banks

According to sources, the panel examined issues pertaining to protection of interests of workers of banks which are likely to be privatised

Inching a step closer to privatisation of two public sector banks, a high-level panel headed by the cabinet secretary recently held a meeting to thrash out various regulatory and administrative issues so that the proposal could be placed with the group of ministers on disinvestment or Alternative Mechanism (AM) for approval.

Pursuant to the announcement made by Finance Minister Nirmala Sitharaman in her 2021 budget speech, the NITI Aayog has suggested a couple of bank names for privatisation to the Core Group of Secretaries on Disinvestment headed by Cabinet Secretary in April, sources said.

The meeting of the high-level panel deliberated on the recommendation of the NITI Aayog on Thursday June 24, sources said, adding the panel would after tying up all loose ends will send the names of the shortlisted PSU banks to AM for consideration.

Headed by the cabinet secretary, the members of the panel include secretaries in the departments of Economic Affairs, Revenue, Expenditure, Corporate Affairs and Legal Affairs, as well as the secretary of administrative department. The panel also has the Department of Public Enterprises, Department of Investment and Public Asset Management (DIPAM) secretary as its member.

According to sources, the panel also examined issues pertaining to protection of interests of workers of banks which are likely to be privatised.

Following a clearance from AM, it will go to the Union Cabinet headed by the Prime Minister for the final nod. Changes on the regulatory side to facilitate privatisation would start after the cabinet approval.

Read | Govt's total liabilities rise to Rs 116.21 lakh crore at end-March 2021

Central Bank of India and Indian Overseas Bank are reported to be probable candidates for privatisation.

The government has budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including two PSU banks and one insurance company, during the current financial year. The amount is lower than the record budgeted Rs 2.10 lakh crore to be raised from CPSE disinvestment in the last fiscal.

In her Budget Speech on February 1, Sitharaman had announced that the government proposes to take up the privatisation of two public sector banks (PSBs) and one general insurance company in the year 2021-22.

"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," she had said.

The government last year consolidated 10 public sector banks into four and as a result, the total number of PSBs came down to 12 from 27 in March 2017. The government has merged 14 public sector banks in the last four years.

Last year in April, the government effected the biggest ever consolidation exercise in the public sector banking space when six PSU lenders were merged into four in a bid to make them globally competitive.