The Indian government may sell its stake in Central Bank of India and Indian Overseas Bank (IOB) as part of its mega privatisation initiative unveiled in the Union Budget in February. While the two banks have been recommended for disinvestment by government think tank NITI Aayog, Bank of India (BoI) may be a potential candidate for sale, sources familiar with the deliberations said.
The proposal from the government think tank is being vetted by the disinvestment and financial services departments, ministry sources said. The exercise is part of a multi-stage process for finalising entities that are to be taken up for privatisation. While NITI Aayog has been tasked with recommending the names, it is then reviewed by the inter-ministerial group of officers and subsequently by a group of ministers, before the Union Cabinet puts its seal of approval.
Sources in the department of investment and public asset management (Dipam), which handles the government’s asset sales programme, said it will examine the proposal with the department of financial services and discuss the legislative changes needed for the privatisation of the state-run banks. “The timeline will depend on the legislative changes required,” the sources added.
Besides, the issue will have to be discussed in detail with the RBI as the law and regulations provide a special dispensation for state-run entities in several areas. The Cabinet recently cleared the decks for the sale of government stake in IDBI Bank, but sale of the Centre’s holding in the two state-run entities will break new ground as the Narendra Modi administration has embarked on an ambitious privatisation drive, which for the first time includes the financial services space.
The government is hoping to conclude the sale of IDBI Bank stake during the current financial year.
Among the dozen state-run lenders, NITI Aayog had set its eyes on the six entities that were not part of the merger initiative a few years ago and included Bank of Maharashtra, Punjab & Sind Bank and UCO Bank in addition to BoI, IOB and Central Bank.