India committed to privatisation, bank reforms, says finance minister

Finance Minister NIrmala Sitharaman | Illustration: Moneycontrol

The government is committed to its intent to privatise state-owned enterprises and push banking sector reforms, according to the finance minister.

The initial public offering of Life Insurance Corporation of India has shown that the government is committed to the process of disinvestment, Nirmala Sitharaman said on September 5 at Ashwamedh - Elara India Dialogue 2022. The government will go ahead with the banking sector reforms as well, she added.

The Centre had proposed privatisation of two public sector banks along with one general insurance company in the 2021-22 Budget. It has also unveiled a public sector enterprise policy aimed at reducing the presence of government in running businesses.

The government is working on a path to boost economic growth over the next 25 years, along with the central bank, Sitharaman said. India’s economic recovery is firm and on a good foundation, she emphasised.

Divestment in focus

The finance minister also spoke about insurance behemoth, Life Insurance Corporation of India's (LIC) recent listing. Stating, "Strategic disinvestment has taken place in LIC. So shall we go ahead with the banking sector reform as well. Even on that the cabinet has given a clearance, we have mentioned it in the budget. We shall take it forward."

Earlier in May, the Cabinet Committee on Economic Affairs had also given its in-principle approval for strategic disinvestment along with transfer of management control in IDBI Bank, as per a government release. It however added that the extent of respective shareholding to be divested by the Centre and LIC shall be "decided at the time of structuring of transaction in consultation with RBI".

Notably, LIC (as promoter) and the Centre (as co-promoter), together hold more than 94 percent equity of IDBI Bank (49.24 percent and 45.48 percent, respectively).

The LIC Board passed a resolution to reduce stake in IDBI Bank through divestment, while the government envisages strategic stake sale with intent to relinquish management control.

Sitharaman had, while presenting the Union Budget FY 2021-22 in Parliament on February 1 this year, announced that government has approved a policy of strategic disinvestment of public sector enterprises that will provide a clear roadmap for disinvestment in all non-strategic and strategic sectors. Banking is among the strategic sectors.

“A number of transactions namely BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat among others are proposed to be completed in FY 2021-22”, the Minister had informed the house. Sitharaman had then also added that other than IDBI Bank, a proposal of privatization of two Public Sector Banks and one General Insurance company will be taken up in the year 2021-22.