(Reuters) : Government has shortlisted four mid-sized state-run banks for privatisation. The four banks are Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India, two officials told Reuters on condition of anonymity as the matter is not yet public. However, finance ministry spokesman declined to comment on the matter.
The step is being taken under a new push to sell state assets and shore up government revenues, the sources said.
Privatisation of the banking sector, which is dominated by state-run behemoths with hundreds of thousands of employees, is politically risky because it could put jobs at risk but Prime Minister Narendra Modi’s administration aims to make a start with second-tier banks. However, officials have advised caution fearing resistance from unions representing the employees.
The government, however, will continue to hold a majority stake in India’s largest lender State Bank of India, which is seen as a ‘strategic bank’ for implementing initiatives such as expanding rural credit.
Government also wants to overhaul a banking sector reeling under a heavy load of non-performing assets, which are likely to rise further once banks are allowed to categorise loans that soured during the pandemic as bad.
India’s deepest economic contraction on record caused by the pandemic is driving the push for bolder reforms, economists say.
