The industry is betting on Punjab & Sind Bank, Bank of Maharashtra and Bank of India as the most likely candidates for the finance minister’s ambitious bank privatisation program. In her Budget speech, finance minister Nirmala Sitharaman mentioned the government planned to privatise two sate-run banks, other than IDBI Bank. Analysts think that the most likely candidates will be from the pool of banks which had been not element of the merger procedure. The government had earlier permitted merger of 13 banks into 5 banks.
Anil Gupta – vice-president and sector head, monetary sector ratings, ICRA, mentioned Punjab and Sind Bank and Bank of Maharashtra looked probable candidates for privitisation. Of the six banks kept out of merger, Indian Overseas Bank, Central Bank and UCO Bank are beneath PCA (prompt-corrective action), he explained. The Reserve Bank of India had kept the 3 banks in the PCA framework just after a enormous asset top quality deterioration, losses in the books and decrease capital levels. Gupta mentioned PCA banks had been unlikely to be presented for privatisation due to poor investor demand.
Leaving State Bank of India and 5 merged banks, there are six public sector banks in the banking technique. The six banks contain Bank of India, Punjab and Sind Bank, Bank of Maharashtra, Indian Overseas Bank (IoB), Central Bank of India and Uco Bank. Gupta also mentioned the government was unlikely to take into consideration privitisation of Bank of India due its massive size. “The government may want to test the water with smaller banks first,” he added.
According to JM Financial, “While the details are awaited, we believe the most likely candidates will be from the pool of banks which were not part of consolidation. While these candidates are small and are not expected to provide any material resources to the government, we believe that this is a step in the right direction and can act as a test case for privatisation of other major public sector banks in future.”
In a note to its customers, Kotak Institutional Equities mentioned the job of privatising two PSU banks may perhaps be tough to reach but could outcome in more privatisations, if profitable. Lack of interest amongst prospective purchasers remains a essential concern provided the structure of these banks, Kotak mentioned.
In an interview with CNN News 18, Niramala Sitharaman mentioned the government wanted more public sector banks which are functionally powerful, professionally managed and can meet the demands of expanding aspirational India. “If I am going to be sitting around with such public sector banks which are just not in a mood or a position to stand up, is it right to pour tax-payers money into such banks? When there may be buyers who can buy and run it efficiently,” she mentioned.
The government has proposed to introduce needed legislative amendments for privatisation of two PSBs in the Budget session itself.