Govt to amend banking laws to facilitate and privatise 2 PSU banks

The government will introduce the banking laws amendment bill in the upcoming Winter Session, which begins Monday. This will facilitate the privatisation of two public sector banks (PSBs). Earlier this year, Finance Minister Nirmala Sitharaman announced the privatisation of PSBs as part of a disinvestment drive to raise Rs 1.75 lakh crore.

The government may not completely exit the two state-run banks that will be privatised, preferring to retain at least a 26 percent stake for the first few years. According to a senior official, the size of the stake sale will be determined by investor interest and market conditions.

The government has not disclosed which banks will be privitised. The speculations are that the Indian Overseas Bank and Central Bank might be the two banks lined up by the government for divestment. These banks were among the top gainers in the stock exchanges on Wednesday.

However, both banks released clarification in this regard.

IOB said, "In this regard, we inform that we ha,:,e not received any communication regarding privatization of Bank from DFS/ Government of India and we are unaware of the reasons for the sudden movement in stock price. It may be due to speculation."

CBI said, "We inform you that Central Bank of India is a public sector bank promoted by the Government of India. As regards the captioned media news, we do not have any information on the privatization of the Bank as of date. There is no such negotiation/event taking place at the level of the Central Bank of India. It is further submitted that as of date, we do not have any information/announcement which in our opinion may have bearing on the price/volume behavior in the scrip of the Bank."

The Banking Laws Amendment Bill of 2021 will amend the Banking Companies Acquisition and Transfer of Undertakings Acts of 1970 and 1980, as well as incidental amendments to the Banking Regulation Act of 1949. The bill is expected to bring down the minimum government holding in the PSBs from 51 percent to 26 percent, sources said.

Meanwhile, CPI general secretary D Raja has written to Prime Minister Narendra Modi, alleging that the government intends to introduce the Banking Laws (Amendment) Bill, 2021 in the upcoming Winter Session of Parliament in order to allow for the privatisation of public sector banks. In the letter, Raja stated that public sector banks serve as catalysts for the nation's economic development in general and for the underprivileged sections of society in particular, and that privatisation would " jeopardise their interests."