India looking to expedite divestiture of state-owned banks

Major insurance player holds sizeable stake in at least one lender

India looking to expedite divestiture of state-owned banks

Insurance News

By Gabriel Olano

The office of Indian Prime Minister Narendra Modi is reportedly looking to speed up the divestiture of four state-owned banks.

The banks are Punjab & Sind Bank, Bank of Maharashtra, UCO Bank, and IDBI Bank, according to a report by Reuters which cited two officials with knowledge of the matter. The Indian government directly owns 47.11% of IDBI, while state-owned Life Insurance Corp. holds 51%.

The Indian government has been pursuing the privatisation of banks and other state-owned firms for several years, and the COVID-19 pandemic has made it even more of a priority, due to the shortfall in tax collections and the resulting economic downturn.

India currently has 13 banks where the government owns stakes directly or indirectly. It is looking to reduce that number to five, as it seeks to overhaul the banking sector. The banks are also facing a possible surge in bad loans, which may force the government to spend more in order to bail them out, the report said.

According to one of the sources cited by the report, Modi’s office instructed the finance ministry to expedite the privatisation of the banks before the end of the current financial year in March 2021.

However, due to the difficult economic situation, it may be hard to find buyers for these banks. In order to make them more attractive to potential investors, officials have advised the government to restructure the banks through various measures, such as offering voluntary retirement to redundant staff and closing non-performing branches.

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