Budget 2021: India plans to privatise two public sector banks

Privatisation of public banks

The introduction of the annual budget yesterday revealed many policies of the government for the coming financial year. The Covid relief package and provisions in favour of farmers have made headlines of the annual budget. In adherence to its plan of privatisation next year, the government will sell stake in two public sector banks.

On February 1, 2021 Union Finance Minister Nirmala Sitharaman said during her budget speech that the government will implement new legislative changes in this parliamentary session to support its divestment plan. She however didn't make any clear indication on which bank government is planning to sell stake in and divest them. In 2019, majority stakes of IDBI bank Ltd. were sold to Life Insurance Corporation of India, leading to privatisation of the lender. Besides the banks, the government will divest stake in general insurance companies. As a part of 1.75 lakh crore divestment plan, the proposed initial offering of LIC will conclude in FY22.

The government aims to draw 1 lakh crore from divestment in public sector banks and financial institutions in FY22, with revised estimates of Rs 32000 crore in 2020-21. This can be seen as another attempt by the government to bring public sector banking reforms. The merger announced in August 2019, merged 10 banks into four which came into effect on April 1, 2020.

In the merger, Punjab National Bank took over Oriental Bank of Commerce and United Bank of India; Union Bank acquired Corporation Bank and Andhra Bank; Allahabad Bank merged with Indian Bank while Syndicate Bank tied up with Canara Bank. In the budget the government made a declaration on recapitalisation plans worth Rs 22000 crore for state owned banks. The citizens including homemakers, farmers, industrialists and health workers hold expectations and aspiration from the budget after a strenuous year which landed the entire world in lockdown adversely affecting millions of livelihoods.