Privatisation of PSU banks: Govt to bring amendments to two legislations

Amendments could be required in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 for privatisation, sources mentioned.

These Acts led to the nationalisation of banks in two phases and provisions of these laws should be modified for the privatisation of banks, they mentioned.

As the government has already introduced the list of legislative business for the Budget session, it’s anticipated that these amendments could also be introduced within the Monsoon session or later during the year, sources added.

The ongoing Budget session is scheduled to take up as many as 38 Bills including the Finance Bill 2021, Supplementary Demands for Grants for 2020-21 and related Appropriation Bill, National Bank for Financing Infrastructure and Development (NaBFID) Bill, 2021, and Cryptocurrency and Regulation of Official Digital Currency Bill, 2021.

Finance Minister Nirmala Sitharaman whereas presenting Budget 2021-22 earlier this month had introduced the privatisation of Public Sector Banks (PSBs) as a part of disinvestment drive to garner ₹1.75 lakh crore.

“Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance firm in the year 2021-22,” she had mentioned.

Later in one of the post Budget interactions, the Finance Minister had mentioned the government will work with the Reserve Bank for the execution of the bank privatisation plan introduced in the Union Budget 2021-22.

“The details are being worked out. I’ve made the announcement but we’re working together with the RBI,” she had mentioned when asked about the proposal.

The government last year consolidated 10 public sector banks into 4 and as a result, the total number of PSBs came down to 12 from 27 in March 2017.

As per the amalgamation plan, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank, making the proposed entity the second-largest PSB.

Syndicate Bank was merged with Canara Bank, whereas Allahabad Bank was subsumed in Indian Bank. Andhra Bank and Corporation Bank have been amalgamated with Union Bank of India.

In a first three-way merger, Bank of Baroda merged Vijaya Bank and Dena Bank with itself in 2019. SBI had merged 5 of its associate banks – State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad- and also Bharatiya Mahila Bank effective April 2017.