Govt looking for complete exit with the help of PSB Privatisation Bill

In the upcoming Monsoon Session of Parliament, the Centre will likely introduce a bill to make amendments in order to facilitate the privatisation of public sector banks, a report said.

The government is mulling an amendment that will allow the Centre a total exit from banks, fully privatising PSBs, The Economic Times reported, quoting an official aware of the developments.

As per the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the central government is required to hold at least a 51 per cent stake in the public sector banks. Earlier, the Centre was to retain at least a 26 per cent stake in PSBs during privatisation, and this would be brought down gradually.

While the dates of the Monsoon Session have not been announced yet, the Centre had listed the Banking Laws Amendment Bill, 2021, in the winter session of Parliament last year. However, the bill was not introduced in the session. The bill had proposed “amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949”, The Economic Times report said.

The Centre’s bill will provide ‘an enabling mechanism,” another official told ET, adding, “We might bring it in this session and then iron out the other issues.”

The official told the newspaper that the changes are based on potential discussions during recent roadshows held for the stake sale of the IDBI Bank.

The finance ministry is in talks with the Reserve Bank of India (RBI) on ownership and controlling stakes pertaining to PSBs’ privatisation. As of now, private banks’ promoters can hold only a 26 per cent stake in PSBs.

Nirmala Sitharaman, while presenting the Union Budget for FY22, had said the government would privatise two public sector banks and one general insurer. She had added that required amendments would be introduced in the Budget Session.

The privatisation process of IDBI Bank is already underway. The bank is incorporated under the Companies Act, 1956; thus, legal amendments are not needed for its privatisation.

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