Government weighs 100% divestment from privatised PSU banks: Report

File image of an IDBI Bank branch facade (Representative Image)

The government is likely to introduce amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, during the Monsoon Session of Parliament to enable full divestment of its stake in public sector banks (PSBs), The Economic Times reported.

One amendment being considered will allow the Centre to completely exit from banks that are privatised, an official told the paper. Inputs from the industry, merchant bankers and potential investors have been taken on record, and more changes could be incorporated to make the stake sale process “faster and with less regulatory hurdles”, the official said.

Moneycontrol could not independently verify the report.

Another official called the bill “an enabling mechanism” that may be brought in this session and then issues ironed out, adding that the changes are based on discussions with potential investors during roadshows for the recent IDBI Bank stake sale.

The government had earlier considered reducing its stake during privatisation to 26 percent at first and then gradually lower. The Act at present holds the Centre at least 51 percent stake in PSBs. Monsoon session dates are yet to be announced.

The report added that the finance ministry is also discussing ownership and controlling stakes in privatisation with the Reserve Bank of India (RBI). Promoters can hold a maximum of 26 percent stake in private banks.

The bill was supposed to be introduced during the Winter Session of Parliament which ended on December 22, 2021. The NITI Aayog had in April 2021 recommended a list of banks that should be privatised. It included the Central Bank of India and the Indian Overseas Bank.

Sources, however, told the paper there has been “no much progress since”.