With the Indian economy showing signs of improvement and a substantial reduction in non-performing assets (NPAs), the government is reportedly considering a re-evaluation of the public sector banks (PSBs) earmarked for privatisation, as reported by Business Standard.
A new panel, comprising representatives from the Finance Ministry, NITI Aayog, and the Reserve Bank of India (RBI), is expected to compile a fresh list of banks for potential privatisation.
This panel is also anticipated to determine the extent of government share dilution in these banks, weighing the financial health of the institutions and their success in reducing bad loans.
India currently boasts 12 PSBs, including State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Punjab & Sind Bank, Indian Bank, Union Bank of India, Bank of India, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank, and UCO Bank.
In the quarter ending 30 June, these banks collectively reported a net profit of Rs 34,418 crore, more than double the Rs 15,307 crore recorded in the same quarter the previous year.
Furthermore, the gross NPAs have seen a significant improvement, dropping from 14.6 per cent in March 2018 to 5.53 per cent by December 2022.
Initially, the government had considered the privatisation of smaller banks, particularly those emerging from the Reserve Bank of India's (RBI) prompt corrective action (PCA) framework, which involves restrictions on lending, dividend payments, and compensation.
This move could have placed Central Bank, Indian Overseas Bank, and UCO Bank on the privatisation list. However, these banks have now shown improved asset quality and increased profitability.
As per reports, the privatisation process may not commence until the fiscal year 2024-25.
The shortlisting of names is a precursor to the final approval by the cabinet.
It's worth noting that India witnessed the merger of 10 PSBs on 1 April 2020, reducing the total number of public sector banks from 27 in 2017 to the current 12.
Nayan Dwivedi is Staff Writer at Swarajya.
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