The government may not bring the Banking Laws (Amendment) Bill 2021 – which aims to privatise two public sector banks (PSBs) – during the ongoing Winter session of Parliament, as it plans to have a relook at some key aspects related to the entire exercise before going ahead with the move.
Sources aware of the development have indicated that the current market scenario is not being seen as conducive for bringing the legislation and discussions are likely to be held with the Reserve Bank of India (RBI) before a final decision is taken on it.
The economic impact of Coronavirus pandemic and the rising threat of the Omicron variant are also other important factors which are learnt to have influenced government’s thinking.
The Winter session will end on December 23.
Also, while the initial thought within the government was to sell two PSBs to private entities by divesting its entire stakes in them, there is a likelihood that government may like to keep 26 per cent share apiece in these banks with itself and sell off the remaining share to different entities, sources in the know pointed out.
Though the proposed legislation was mentioned in the list of bills, which the government aims to bring during the ongoing Winter session, for introduction and passing, sources said that the finance ministry plans to go back to the drawing board and take the views of RBI on these aspects, before moving further. (Also Read: Bill To Privatise 2 Public Sector Banks Coming In Winter Session)
Another key reason behind postponing the bill is the huge unrest among lakhs of employees working in PSBs across the country, who from today went on a two-day strike, protesting the government’s decision to privatise two state-owned banks. (Also Read: State-Run Bank Employees On 2-Day Strike, Services Hit Across India)
Sources further said that banks’ employees’ protests along with the prevailing market scenario and most significantly, the fact that an exercise like privatising two big PSBs – which will entail transferring their assets, large employee base as well as non performing assets (NPAs) – has never been undertaken before and therefore requires greater finetuning.
Discussions with RBI are likely to be held on working out in greater detail the logistics required to transfer thousands of employees of two state-owned banks to the prospective private buyers and the financial cost which this will entail, sources further informed.
While finance minister Nirmala Sitharaman had said in her budget speech for 2021-22 that two PSBs will be privatised during the fiscal as part of the government’s disinvestment drive to garner Rs 1.75 lakh crore during the financial year, the government now seems to have gone into rethink mode.
According to the intent of the proposed bill, for privatising two PSBs, amendments need to be made in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 as well as incidental amendments are required to be made in the Banking Regulation Act, 1949.
Meanwhile, banking operations were affected across the country on Thursday, as close to nine lakh employees of public sector banks went on a two-day strike to protest against the government’s move to privatise two state-owned lenders, unions said.
Customers of PSBs faced difficulties as services like cash withdrawals, cheque clearances and loan approvals came to a standstill due to bank branches not being operational.
Banking operations are likely to be impacted on Friday as well.
The pan-India strike was called by the United Forum of Bank Unions (UFBU) to protest against the government’s decision to privatise two state-run lenders this fiscal.