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Banks privatisation soon as talks in progress between RBI and the Center

Talks are reportedly underway between the Centre and the Reserve Bank of India (RBI) over a special framework for facilitating privatisation of state-run banks, accepting bids from corporate-owned shadow lenders such as Bajaj Finance, Shriram Capital, and Cholamandalam Finance, as well as overseas sovereign wealth funds (SWFs) in an attempt to expedite the disinvestment of public sector banks (PSBs).

Finance Minister Nirmala Sitharaman while presenting the Budget for 2021-22 in February, had announced the privatisation of PSBs as part of a disinvestment exercise to garner Rs. 1.75 lakh crore.

It is worth mentioning here that the key things of such a framework could include relaxations in ownership and management standards for these lenders to allow a wider pool of bidders such as non-banking finance companies (NBFCs). More importantly, they could join in the disinvestment process as long as the financial services business accounts for more than 60 per cent of the turnover of these groups, the financial daily said citing sources. This could imply companies such as Tata Capital, L&T Finance or Aditya Birla Group are being left out.

The apex bank could introduce protections such as asking for shielding the nonfinancial and financial services businesses of corporate groups. “There is a view that an independent and self-contained dispensation for privatisation of public sector banks will help attract more investors and expand the bidder universe for these assets,” the financial daily quoted a person aware of the development.

Further, the easing of norms to trim promoter stakes and relaxations in curbs on voting rights of promoter shareholders as well as allowing the involvement of SWFs of friendly countries are under consideration.

Negotiations are on with the central bank over issues related to the IDBI Bank disinvestment process and that this could evolve into a common outline for privatisation of all state-controlled banks, the daily mentioned citing a government official.

The daily quoted him as saying, “Some of these suggestions were already recommended by an internal working group set up by the RBI itself. We have sought further clarity, and made some suggestions based on the same.”

Last year, the banking regulator had released an internal working group review of ownership guidelines for private sector banks, including their corporate structure.


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