Government mulls bank merger before privatisation

 

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. 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.

“Lots of names are floating but we have not shortlisted anything yet. It will be decided after taking into account performance of the Q4 (Jan- March 2021) and Q1 of FY22 ( April to June 2021) after consultation with the RBI. If required, the PSBs can be merged before privatisation,” a senior official with the finance ministry told TNIE. 

The finance minister, in her budget speech, had announced that two state-run banks will be privatised in the next fiscal. “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.  Other banks including Bank of India as well as Punjab and Sind Bank were also doing the rounds in various media reports.  However, the official added that it may not be the “weakest” bank which will go for privatisation.

“The decision will be taken on the basis of unlocking the valuation and not on which is the weakest Bank. It is a more complex process. A lot of factors may go into the decision making and also on the appetite of the investor,” the official argued. On the timeline, the official ruled out the process would be initiated in the first half of the next financial year.

“There are many legal processes which need to be followed to facilitate privatisation and it requires certain amendments. All these will take some time,” the official said. The government is likely to bring amendments to two legislations later this year. Finance ministry sources said that amendments would be 

required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 to facilitate the privatisation.