Budget 2022: Bank privatisation may get a fresh push 

Policy making circles are agog with expectations on whether the upcoming Budget session of Parliament will see a fresh push ahead on the long pending move to amend the decades-old laws that led to the nationalisation of private banks in India.

The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 are the two key pieces of legislation that were responsible for the government taking over all private banks.

The government was expected to pilot changes to the laws during the Budget session of 2021, and subsequently in the recently concluded Winter session of Parliament.

Amendments were also expected to the Banking Regulation Act, 1949 to pave the way for a speedier privatisation of two public sector banks (PSBs) that were announced by Finance Minister Nirmala Sitharaman in Budget 2021-22 as part of the disinvestment target of Rs 1.75 lakh crore.

A government official told Business Today TV that the Finance Ministry has been working closely with the Reserve Bank of India to reduce sovereign shareholding in PSBs.

The discussion revolves around a proposal for the government to pare its stake in all PSU banks to 26 per cent. At present the law requires the government to maintain a 51 per cent at all times in the 12 PSBs.  

A proposal to increase the foreign direct investment (FDI) limit in public sector banks above the current 20 per cent is also under consideration. Private banks have a higher FDI cap at 74 per cent via the automatic route, provided there is no change of control and management.

"The undone tasks (privatisation of two PSBs announced in the last budget) will be automatically carried forward to next fiscal," the official said.

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