No Privatisation Of Public Sector Banks: FM

Privatisation of any public sector bank (PSB) during the current fiscal is very unlikely due to their low valuations and mounting stressed assets amid the COVID-19 crisis. The government, however, is following the process of consolidation of PSBs for the past few years.  It started with the merger of State Bank of Saurashtra with its parent State Bank of India (SBI) in 2008. Subsequently, State Bank of Indore was merged with SBI in 2010. At present, four public sector banks are under the RBI’s Prompt Corrective Action (PCA) framework, which puts several restrictions on them, including on lending, management compensation and directors’ fees.  So, it does not make any business sense to sell these lenders — Indian Overseas Bank (IOB), Central Bank of India, UCO Bank and United Bank of India — as there will not be any suitors for them from the private banking space. The government will refrain from distress sale of its entities, especially if they are in strategic sectors. Moreover, the government stake in some PSBs has gone past 75 per cent due to successive capital infusions for meeting mandatory regulatory ratios.