Govt to table bill to amend banking law in winter session; privatise 2 public sector banks

The government is going to introduce the Banking Laws (Amendment) Bill 2021 in the upcoming Winter Session of Parliament to enable the privatisation of two public sector banks (PSBs) as part of its Rs 1.75 lakh crore disinvestment target in the current fiscal year. 

The legislation is among the 26 bills that are scheduled to be introduced during the session. 

The bill seeks "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 the Union Budget announcement 2021 regarding privatisation of two Public Sector Banks." 

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Finance Minister Nirmala Sitharaman had announced in the Union Budget 2021 that two public sector banks would be privatised as part of the government's divestment target. 

The bill is not likely to specify the names of the two banks that are slated to be privatised, according to sources. On the contrary, the government would bring about enabling legislation for privatisation of public sector banks. 

Reason for amendment to banking law

There is a logical argument for creating an enabling legislation rather than a specific target law. There have been two strong moves to nationalise banks in India. The first one was in 1969 and the second in 1980. A total of 34 banks were nationalised. 

An act of Parliament was created for the nationalisation process of the banks. This was besides the specific law that created the State Bank of India (SBI), which is India's largest public sector bank. 

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For many years, the outline of PSBs changed through amalgamations which did not need changes to the existing banking laws. However, the government is required to introduce laws in Parliament to 'denationalise' or privatise banks. 

Meanwhile, the pension bill is also likely to be introduced in the upcoming session of the Parliament. 

Its objective is to amend the Pension Fund Regulatory and Development Authority (PFRDA) Act, which will facilitate the separation of the National Pension System Trust from PFRDA as announced by FM Sitharaman in the last Budget to encourage extensive pension coverage. 

Also Read: Centre to amend two legislations on privatisation of PSU banks

(With inputs from Rahul Shrivastava.)