Bank Privatization: Government Plans Amendments to Banking Laws for Privatisation of PSU Banks

According to anonymous sources cited by PTI, the government is considering introducing new amendments to the Banking Regulation Act and other related laws during the upcoming Union Budget 2024 session. These amendments could potentially result in the government’s shareholding in public sector banks (PSBs) falling below the current threshold of 51%. Additionally, amendments to acts such as the Banking Companies (Acquisition and Transfer of Undertakings) Act of 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act of 1980 may also be proposed. These changes are crucial to facilitate the process of privatisation, as the existing laws were responsible for the nationalisation of banks in the past.

It is worth noting that the government had previously attempted to introduce amendments to these laws during the 2021 winter session. During the presentation of the Union Budget 2021, Finance Minister Nirmala Sitharaman had announced plans for the privatisation of public sector banks. However, these proposals were unable to move forward at the time.

Speaking about the privatisation plans, Sitharaman stated, “Other than IDBI Bank, we propose to take up the privatisation of two PSBs and one general insurance company in 2021-22.” In recent years, several bank mergers have already taken place as part of the government’s consolidation efforts. Syndicate Bank was merged with Canara Bank, Allahabad Bank with Indian Bank, and Andhra Bank and Corporation Bank were merged with the Union Bank of India. In 2019, Bank of Baroda merged with Vijaya Bank and Dena Bank.

Furthermore, the State Bank of India (SBI) underwent a significant merger in April 2017, incorporating five of its associate banks: State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, and State Bank of Hyderabad, as well as Bharatiya Mahila Bank.

The Union Budget 2024 is scheduled to be presented on July 23, with the parliamentary session running from July 22 until the passage of the Finance Bill on August 12. The proposed amendments to the banking laws will likely be a crucial topic of discussion during this period, as the government seeks to further its agenda of privatisation in the banking sector.