The government plans to introduce a banking laws modification bill in the forthcoming Winter Session, which begins on Monday, to allow the privatization of two public sector banks (PSBs). Earlier this year, Finance Minister Nirmala Sitharaman announced the privatization of PSBs as part of a disinvestment campaign aimed at raising Rs 1.75 lakh crore.
According to reports, the Banking Laws (Amendment) Bill, 2021, which is scheduled to be introduced during the session, will reduce the minimum government holding in PSBs from 51% to 26%.
However, sources say the Union Cabinet will make the ultimate decision on this when it vets the proposed legislation.
According to the list of legislative business for the Winter Session, “to effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980, and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatization of two Public Sector Banks.”
According to sources, these Acts resulted in the nationalization of banks in two phases, and aspects of these laws must be altered in order for banks to be privatized.
Parliament enacted a bill allowing state-run general insurance companies to be privatized during the just-finished session.
The General Insurance Business (Nationalization) Amendment Bill of 2021 repealed the requirement that the government owns at least 51% of the equity capital in a specified insurer.
The Act, which went into effect in 1972, allowed for the purchase and transfer of shares in Indian insurance firms as well as commitments from other existing insurers in order to better serve the needs of the economy by ensuring the growth of the general insurance industry.
The government think tank NITI Aayog has already recommended two banks and one insurance company for privatization to the Core Group of Secretaries on Disinvestment.
The Central Bank of India and Indian Overseas Bank, according to insiders, are possible candidates for privatization.
According to the procedure, the Core Group of Secretaries, led by the Cabinet Secretary, will send its suggestion to the Alternative Mechanism (AM) for approval, and then to the Prime Minister’s Cabinet for ultimate approval.
Economic affairs secretary, revenue secretary, expenditure secretary, corporate affairs secretary, legal affairs secretary, Department of Public Enterprise’s secretary, Department of Investment and Public Asset Management (DIPAM) secretary, and an administrative department secretary are all members of the Core Group of Secretaries.