Finance Minister Nirmala Sitharaman announced on Monday that the government will divest its stake in two PSBs, apart from one general insurance company. While the FM did not name in her Union Budget 2021 speech the two PSBs the government plans to privatise, however, analysts point out Punjab National Bank (PNB) and Bank of Baroda (BoB) are possible banks.
Both state-run banks have seen their balance sheet inflated as smaller PSBs were merged with the two. While United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank and Bank of Baroda absorbed Vijaya Bank and Dena Bank.
The government has finally taken a right step towards the long-awaited reforms needed in the banking sector. The decision was expected since the merger of 13 public sector banks into five which was done last year. The announcement also mentioned that the government is also planning to strengthen the credit flow of PSU banks by recapitalizing Rs 20,000 crore in them.
Finance Minister Sitharaman said the necessary legislative amendments for PSB privatisation will be introduced in the current budget session of the Parliament.
The Reserve Bank of India has supported the initiative since the merged banks will be benefited as their regional network will be expanded. For instance, the influence of the United Bank of India in the eastern region will be expanded to the northern and central regions as well because of the vast network of PNB.
However, the bank unions are not happy with the proposed exercise and said they will oppose it. In a statement, All India Bank Employees’ Association (AIBEA) general secretary C.H. Venkatachalam said, “As regard the government’s proposal to privatise the banks along with more FDI in the insurance sector, the AIBEA will shortly decide agitational programmes including strike actions.”