Budget 2021: FM Says Two Public Sector Banks To Be Privatised Soon

While Sitharaman said, these would be two banks, she did not specify what the two banks will be.

(Photo: Kamran Akhter/The Quint)

In her budget speech on 1 February, Finance Minister Nirmala Sitharaman said that two banks will be privatised along with one general insurance company.

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“Other than IDBI Bank, we propose to take up the privatisation of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this Session itself,” she said. 

The government will bring the necessary legislative changes to enable this plan, however Sitharaman did not specify which two banks will be privatised or how much would be divested.

This is another attempt by the government to bring reforms in public sector banking. In August 2019, they had announced the merging of 10 public sector banks into four public sector banks.

Privatisation Highlights

• Foreign Direct Investment in insurance to increase from 49 percent to 74 percent
• Initial public offering (IPO) of LIC will be brought in Financial Year 2022
• The Finance Ministry also plans to complete the divestments of BCL, CONCOR and SCI in 2021-22
• NITI Aayog to work on strategic disinvestment for next list of central public sector companies
• Except for four strategic areas, PSUs in other sectors to be divested
• To further consolidate the financial capacity of PSBs, further recapitalisation of Rs 20,000 crore is proposed in 2021-22

Announcing the increased in FDI limit for insurance from 49% to 74%, she also mentioned Life Insurance Corporation of India (LIC) will go public in 2021-22.

The government expects to raise Rs 1 lakh crore from disinvestment in public sector banks and financial institutions in FY22.

The government also announced a package for recapitalisation of PSBs. “To further consolidate the financial capacity of Public Sector Banks, further recapitalisation of Rs 20,000 crores is proposed in 2021-22,” the finance minister said.