Divestment secy says privatisation of banks still far away, calls for realistic targets

After failing to meet a Rs 1.75 lakh crore divestment target in FY22, the Indian government had lowered it to Rs 65,000 crore in FY23, but has raised less than half of it so far. Recently the NITI Aayog dismissed rumours of a list of banks slated for privatisation, at a time when less than 50 per cent employees in the sector are working for state-owned lenders. Now the divestment secretary has confirmed that the privatisation of two public sector banks announced in the Budget for 2021-22, will still take time.

Speaking to a news agency, he said that bids for IDBI Bank have been received from private players, and this may pave the way for divestment in two public sector banks. The government had initially put its 30.48 per cent stake in IDBI on sale along with a 30.24 per cent share belonging to Life Insurance Corp of India in October.

Now Reserve Bank of India's fit and proper norms will facilitate the next phase of divestment, as the regulator will conduct due diligence of the bank. The bidding process may be dragged to the first half of FY24, which means the bidder will be finalised after nine months from now.

Those eligible for bidding include, private banking firms, foreign lenders, and non-banking finance companies, as well as investment funds registered with the Securities and Exchange Board of India.

The divestment secy also expressed hope that the government will set a more realistic target to raise funds from stake sales in PSUs and banks. The comments come as the government has met divestment targets only twice in a decade, and even the 48 per cent of the target achieved in FY23 was from LIC's IPO alone.