Bank privatisation to be started soon

The finance ministry is expected to soon seek cabinet approval for amendments to the Banking Regulation Act, 1949, and possibly other legislation as it kickstarts the process to privatise two state-run lenders. The proposed changes could include the removal of the 20% foreign investment cap applicable to public sector banks in these two cases. A more attractive voluntary retirement scheme (VRS) for employees of these two banks may also be proposed to the cabinet.
Inter-ministerial consultations have been completed on a draft cabinet note on the proposed amendments. Finance minister Nirmala Sitharaman had in her budget speech last year announced privatisation of two state-run banks as part of the government’s disinvestment programme without naming any lenders. Subsequently, in April 2021 the NITI Aayog had shortlisted two banks without identifying them.
The government had earlier listed the Banking Laws (Amendment) Bill, 2021, in the winter session of parliament to provide the necessary legal framework for privatisation of public sector banks, but it was not moved for consideration. Following the state elections, the government is widely expected to press ahead with its reform agenda. Bank unions have opposed the move and sought more public consultation with stakeholders, including workers, before taking any further steps.