The government is set to declare its dedication to financial sector reforms in the upcoming interim budget. This will include a roadmap for significant changes in 2024-25, with a focus on privatizing a state-run bank and a general insurance firm, according to insiders.
Renewed Focus on Financial Inclusion: Finance Minister Nirmala Sitharaman is expected to announce a renewed emphasis on financial inclusion through digital initiatives on February 1. The government aims to finalize the Insurance Amendment Bill, slated for the next financial year, to pave the way for strategic reforms in the sector.
Execution of Key Announcements: Some pivotal announcements made during the Modi government’s second term, such as the privatization of two state-run banks and a general insurance firm, are anticipated to take effect in 2024-25. The interim budget will reinforce the government’s commitment to these financial sector reforms.
Digital Banking Units (DBUs) in Focus: Digital Banking Units (DBUs) will play a crucial role in the government’s financial inclusion schemes. Around 100 DBUs operate nationwide, providing collateral-free loans at concessional rates, especially in schemes like PM Vishwakarma.
Renewed Efforts in Privatization: In both the insurance and banking sectors, there will be renewed efforts to identify new entities for privatization. This aligns with Finance Minister Sitharaman’s 2021 announcement of privatizing two state-run banks.
Progress on Banking Laws (Amendment) Bill 2021: The Banking Laws (Amendment) Bill 2021, listed in 2021, is yet to be introduced in Parliament. This bill aims to amend Acts from 1970 and 1980, along with the Banking Regulation Act of 1949, facilitating the privatization of two state-run banks.
IDBI Deal and Potential Candidates: The IDBI deal is expected to materialize in the first half of the next fiscal year. Reports suggest conglomerates like the Piramal Group are interested in acquiring a state-run lender. The Reserve Bank of India is reviewing applications for IDBI Bank, where the government and Life Insurance Corporation plan to divest their 60.72% stake.
Fresh Assessment of Insurance Sector: A fresh assessment of the insurance sector will commence, leading to the privatization of one general insurance firm. The 2021 General Insurance Business (Nationalization) Amendment Act enables the government to reduce its stake in state-owned general insurers to below 51%.
Proposed Insurance Laws (Amendment) Bill: In the next fiscal year, the government is likely to introduce the Insurance Laws (Amendment) Bill, proposing a composite license provision. This provision allows insurers to offer both general and health insurance through a single entity.
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