BNW News
Union Finance minister Nirmala Sitharaman is unlikely to take up bank privatisation in the Budget 2024-25, according to highly placed sources in the government.
Earlier, reports had emerged that the Government is considering a list of banks to privatise in this round drawing comfort from the healthy market sentiments and reform-intent. But, a top government official said this is unlikely to happen this time.
Union Budget is set to be presented on 23 July.
“The issue of bank privatisation is a sensitive one and needs more deeper discussions and planning. Hence, this is unlikely this time,” said the official to Biznewsweek on condition of anonymity.
India currently has 12 public sector banks (PSBs). In 2020, the government executed a mega merger by folding 10 state-run banks into four, reducing the number.
Earlier, there were also media reports that the government is considering merging a few banks this time– UCO Bank, Bank of Maharashtra, Punjab & Sind Bank, and Central Bank of India. This is also unlikely in the Budget 2024-2025, said the person quoted above.
Presently, the government holds anywhere between 57-98 per cent stake in different state-run banks.
Despite repeated promises, all that has happened so far is a mega-merger of 10 state-run banks into four in 2019-20 and a government-nudged buy of IDBI Bank using India’s largest insurer – Life Insurance Corporation of India – in 2019.
The gross non-performing assets (GNPA) ratio of banks fell to a 12-year low of 2.8 per cent at end-March 2024, per the RBI’s June Financial Stability Report (FSR). The scheduled commercial banks’ or SCBs’ net non-performing assets (NNPA) ratio fell to 0.6 per cent at end-March 2024.
PSBs have their capital adequacy ratios above 15 per cent, way higher than the mandated 12 per cent. For instance, banks like Uco (16.98), Punjab and Sind (17.16) and Bank of Maharashtra (17.38) have CAR way above the mandatory levels.