News on bank privatization: government wants to speed up sale of stakes in four banks: report | Business News in India

NEW DELHI / MUMBAI: Prime Minister Narendra Modi’s office has asked officials to speed up the process of reducing government stakes in at least four predominantly state-owned banks in the current fiscal year, according to two officials familiar with the discussions .
The sources said the four lenders are Punjab & Sind Bank, Bank of Maharashtra, UCO Bank and IDBI Bank, in which the government has majority stakes through direct and indirect stakes.
New Delhi wants to overhaul the banking sector and is also pushing the bank privatization and other state-owned enterprises to help raise funds for budgeted spending amid declining tax revenues due to the economic downturn caused by the pandemic.
The prime minister’s office wrote a letter to the finance ministry earlier this month asking it to speed up the process of privatizing these lenders during the current fiscal year, which ends in March 2021, a government source said. having direct knowledge of the case.
“The process of bank privatization has started,” the person said, adding that consultations had already taken place.
The prime minister’s office and lenders did not immediately respond to requests for comment, while the finance ministry declined to comment.
The sources, who declined to be named because the talks are private, noted that the government’s timetable is aggressive and could be a challenge given current market conditions.
Last month, Reuters reported that India was seeking to privatize more than half of its state-owned banks to reduce the number of state lenders to just five as part of a banking sector overhaul.
India currently has a dozen public sector banks in addition to IDBI, in which the government owns 47.11% while state insurance giant Life Insurance Corp has a 51% stake.
The decision to privatize the banks also precedes an anticipated increase in the growth in bad debts to lenders, which could force the government to inject new funds to bail out public lenders.
However, selling stakes in these lenders will be difficult and could spill over into the next fiscal year as these banks are already burdened with a higher proportion of bad loans, bank and government officials previously said.
Another government official involved in the campaign to sell shares said more consultations would take place before the process continues.
As the government is keen to push reforms amid the pandemic, some officials have advised the government to restructure these banks ahead of privatization to reduce their losses by offering voluntary retirement to excess staff and closing loss-making branches at home and abroad. to make them more attractive active, according to the sources.
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