Large Portion Of Funds Allocated To Bank Recapitalisation Will Go Into Banks Identified For Privatisation: Report

The central government could possibly allocate a considerable portion of their revised estimate of Rs 15,000 crore for bank capitalisation for 2021-22 to banks that are identified for privatisation, Economic Times reports.

Further, the government is also confident of carrying out its privatisation plans by the second quarter of 2022-23.

A government official in the know of developments told the aforementioned publication that the overall strategy is to reinforce the balance sheets of these banks so that they can induce enough interest from potential investors.

The Union Budget 2022-23 has made no provisions for bank recapitalisation whereas it cut down the same by Rs 5000 crore to Rs 15,000 crore in the revised estimates for the ongoing fiscal.

“Most state-run lenders have plans to raise capital on their own strength, so there is no pressing need for meeting regulatory requirements or growth capital,” an official was quoted by the Economic Times.

Though the Niti Aayog has reportedly shortlisted the Indian Overseas Bank and the Central Bank of India for privatisation, a final call on these candidates hasn’t been taken yet.

The Banking Laws Amendment Bill 2021 proposes that the government will retain 26 per cent stake in the banks that will be privatized. However, this bill hasn’t been listed in the ongoing session of the Parliament.