BANKING & FINANCIAL SERVICES - Privatisation Plans Raise More Questions Than Answers

The government will have to complete complex, lengthy processes before selling stakes

-  SALIL PANCHAL

As the dust settles on the euphoria following Nirmala Sitharaman’s growth oriented Budget, it is becoming apparent that much of the proposed reforms in the banking, financial services and insurance sector are fraught with challenges, and could take years to be completed.

“Other than IDBI Bank, we propose to take up the privatisation of two public sector banks (PSB) and one general insurance company in 2021-22. This would require legislative amendments and I propose to introduce them in this session itself,” the finance minister said in her Budget speech on February 1. She also spoke about publicly listing Life Insurance Corporation (LIC) in 2021-22 for which the requisite amendments will be made in this session itself.

What is unclear is whether the government will let go of complete management control in the two PSBs. It could well be that it wants to sell a small stake in those banks and allow private investors into them.