Government To Amend Key PSB Privatisation Laws in Monsoon Session of parliament – The central government has started the process of privatizing the Public Sector Banks and an inter-ministerial consultations is being created to draft the legislative changes required for privatization of PSBs. Government is planning for amending all the relevant laws at once, so that the process of PSB privatization is not hindered by any legal hurdles.
Recently, the government has repealed the law governing BPCL to pave the way for its privatisation.
What are the Hindrance in Public Sector Bank Privatization ?
Following are the major hindrance in the privatization of Public Sector Banks. Government is looking after the amendment of the bills in the parliament for easy process through.
1.Discussion are taking place within the government on whether to repeal the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 (nationalisation Acts).
2. The voting rights cap of 10% for a non-government shareholder irrespective of his/her shareholding is among the key constraints identified.
3. As per Banking Regulation Act, 1949, that no shareholder of a banking company – PSB or private sector bank – can exercise voting rights more than 26%.
4. Providing higher voting rights to the promoters
5. Before repealing the bank nationalization laws, a procedure has to be developed for transition of the PSBs from under these Acts to the Companies Act.
6. RBI to change its current stance which is towards limiting promoter control.
Earlier, the finance minister Nirmala Sitharaman announced the government’s plan to privatize two PSBs and one general insurance company in the current financial year. While the Niti Aayog has reportedly identified a few PSB candidates for privatization, the RBI and the government are in talks on the privatisation of the two banks in the current year.
Also Read – PSB Privatisation – Government May Sell Pension Fund to Attract Buyers
According to the sources, before repealing the bank nationalization laws, a procedure has to be developed for transition of the PSBs from under these Acts to the Companies Act. The precedents for this are being studied. Other companies have shifted from other Acts to Companies Act, but no nationalized has seen such transition yet. There were 5-6 banks, including Axis Bank, ICICI and IDBI Bank, which were government-owned at some point in time, but were not nationalized banks. Hence, their privatization was rather smooth. After consultations and seeking legal opinion, legislative action with regard to nationalization acts and banking regulation act are expected in the monsoon session of Parliament.
As FE had reported earlier, the Niti Aayog had asked the government to retain control over the country’s top four state-run lenders — State Bank of India, Punjab National Bank, Bank of Baroda and Canara Bank – even as it recommended that three small PSBs – Punjab & Sind Bank, Bank of Maharashtra and Uco Bank — be privatised on a priority basis. As for the remaining five PSBs (Bank of India, Union Bank, Indian Overseas Bank, Central Bank and Indian Bank), the government may either amalgamate them with the four larger ones it chooses to retain or trim its stake in them over a stipulated time-frame to 26%, before exiting fully, according to an earlier Niti Aayog proposal.
