Central Bank, Indian Overseas Bank to be privatised this fiscal: Report

The Central Government has identified two public sector banks – Central Bank of India and
Indian Overseas Bank – to be privatised as part of the amendments to the
Banking Regulations Act and the Banking Law Act, likely to be implemented during
the upcoming monsoon session of the Parliament.

Finance
Minister Nirmala Sitharaman had, in the Union Budget 2021, announced the
decision to privatise two banks during the fiscal 2021-22. As part of the changes
to the Public Sector Enterprise policy for ‘Atmanirbhar Bharat’, government
think-tank NITI Aayog was tasked with identifying PSUs that can be privatised,
merged or made subsidiaries of other PSUs, according to a News 18 report.

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In a report
to the core group of secretaries on disinvestment, NITI Aayog outlined these
two banks to be privatised this fiscal. Once the decision is finalised by the
core group, which is headed by the Cabinet Secretary, the report will go to
alternative mechanism (AM) for approval. The final nod will be given by the Prime
Minister Narendra Modi-led Cabinet.

Sitharaman had
said that the “interests of workers of banks which are likely to be privatised
will absolutely be protected whether their salaries or scale or pension, all
will be taken care of”.

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She also said
that banks in the country needed to be bigger, like the State Bank of India. “We
need banks which are going to be able to scale up… We want banks that are going
to be able to meet the aspirational needs of this country,” the finance
minister had said.

According
to PTI, the banks are likely to come out with a voluntary retirement scheme
(VRS). “An attractive VRS will make them lean and fit for takeover by the
private sector entities that are keen to enter the banking space,” PTI quoted a source as saying.

The Centre
is also looking to exit the LIC-controlled IDBI bank. The government and LIC own
over 94% equity of IDBI Bank, with LIC having a 49/21% stake.