Tuesday, 24 May, 2022
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Privatisation is here — these two public sector banks could be the first ones to be sold

Bank stocks surge as Budget 2021 initiates long pending reforms, but unions oppose move.

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Mumbai: Privatisation of public sector banks (PSBs) is finally here. On Monday, Finance Minister Nirmala Sitharaman announced that the Narendra Modi government will divest its stake in two PSBs, apart from one general insurance company. Moreover, the disinvestment process of IDBI Bank will also be completed in the next fiscal.

While the FM did not name in her Budget 2021 speech the two banks the government plans to privatise, analysts point out Bank of Baroda (BoB) and Punjab National Bank (PNB) are possible candidates.

Both state-run lenders have seen their balance sheet swell as smaller PSBs were merged with the two. While Bank of Baroda absorbed Vijaya Bank and Dena Bank, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank.

After the announcement, BoB shares shot up 8.6 per cent on the Bombay Stock Exchange while PNB shares closed almost 7 per cent higher. Stocks of most commercial banks ended in green Monday following a series of budget announcements to foster banking sector reforms.

“After the government’s last announced merger of 13 public sector banks into five, the government has taken the first step towards privatising state-run banks starting with divestment of two PSU banks, in a bid to expedite long-awaited reforms in the banking sector. We believe merged PSU banks like BoB, PNB or non-merged banks like Bank of India, Bank of Maharashtra, may be on the radar,” said Kajal Gandhi, BFSI analyst at stock broker ICICIdirect.

Bank of India, UCO Bank, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank and Punjab & Sind Bank are some of the PSBs that were not a part of the merger.

Also read: Coming up — a ‘bad bank’ that will manage India’s record levels of soured debt

Why BoB and PNB could be better fit

According to analysts, BoB and PNB are better structures when it comes to divestment among public sector banks. Both the banks are trading at around 0.45 times the price to the book value.

“They [BoB & PNB] are better choices to attract investor’s interest. Under the consolidation exercise — BoB and PNB are better structured entities now. Relatively better quality companies were merged into them,” said Deven Choksey, managing director of KR Choksey Investment Managers.

He said the proposal to privatise two PSBs and one insurance firm is the beginning of the privatisation process and it could bring in many more banks eventually. “For investment perspective, such PSBs could attract new investors, which in turn should result in rerating them,” he said.

In a statement, PNB managing director and chief executive S.S. Mallikarjuna Rao described the strategic disinvestment plan a “step in the right direction”.

“Stake sale by the government in public sector companies and financial institutions, including 2 PSBs and one insurance company, in the next fiscal year is a welcome move,” Padmaja Chunduru, MD & CEO of state-run lender Indian Bank, said in a statement.

Unions oppose move

In its trend and progress report in December 2020, the Reserve Bank of India had noted that the merged entities can now reap benefits of synergy, especially in the case of branch network presence across regions.

For example, United Bank of India, which had a large presence in the eastern region, will now benefit from the more diversified branch network of PNB that had a vast network in the northern and central region before the merger.

FM Sitharaman said the necessary legislative amendments for PSB privatisation will be introduced in the current budget session of the Parliament.

However, the bank unions are not happy with the proposed exercise and said they will oppose it.

In a statement, All India Bank Employees’ Association (AIBEA) general secretary C.H. Venkatachalam said, “As regard the government’s proposal to privatise the banks along with more FDI in the insurance sector, the AIBEA will shortly decide agitational programmes including strike actions.”

Also read: Modi govt’s plan for a Development Finance Institution will reduce infra burden on banks


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  1. Some time after or next India govt will being offer Ipo of India praliment for the reduce fiscal deficits and ten and twenty year after all India govt is change to private govt on

  2. Many readers believe that privatisation of banks will be the panacea that cures the many ills that afflict India’s wobbly, bloated, bureaucratic and nearly bust public sector banks. Alas, there is no such miracle cure going by the history of privatisations in India and elsewhere. But many commenters welcome this step by the Modi government.

    A sample of such optimistic comments:

    Mr Ramesh Vengurlekar authoritatively claims:

    “.. Privatisation will bring competiveness, quality and discipline ..”

    Mr M N Kannan Unni, presumably from God’s own country, pontificates:

    “ .. It is high time, every single PSB followed by every single PSU be privatised. It is not govt’s business to be in business… Govt’s job is to govern ..”

    Mr Atul Kumar Garg is able to peer into the future and predicts:

    “.. A good initiative, if govt. goes for privatization, the revenue generation will be more ..”

    Then there are those like Mr H.S.Trivedi who are certain that privatisation will improve customer service.


    “.. Banking industry must privatize,so employees of Bank be, perfect, punctual, responsible, & co-operate customer, & mischief control, NPA control, public interest maintain ..”

    Whilst economic theory might posit that “competiveness, quality and discipline” will result from privatisation, there is absolutely no guarantee that these benefits will materialise in practice.

    One important determinant of the success of privatisation is the quality of the regulatory regime that is put into place to regulate the privatised banks. As well as the efficacy in the implementation of the regulatory regime. Sadly, history shows that in India, “regulatory capture”, lack of independence of the regulator from political interference and good old-fashioned corruption will corrode the regulator too. Additionally, the banks themselves cannot be prevented from engaging in Mergers & Acquisitions, risky trades and other operations that are market distorting and capable of causing consumer harm. And even generating macroeconomic risks as they have done in other countries.

    The much ballyhooed privatisation waves that one saw in the Thatcher and Reagan years did not generally give the expected benefits to the consumer that they were touted to yield. And in many sectors – railways for instance – the UK government is now slowly re-nationalising, tacitly accepting the failure of privatisation. And acknowledging the rent-seeking behaviour of firms the difficulties and overheads in regulating them.

    Yes, there are other sectors like airlines where competition has yielded lower prices and these have been transferred to the consumer. But even in the airline sector, concerned voices are being raised about the lower safety standards that airlines are forced to stoop to in order to keep prices low. For instance, European budget airline RyanAir was in the news for carrying very limited quantities of reserve fuel and endangering the lives of passengers. Since carrying fuel adds to the weight of the plane, pilots were rewarded for their fuel efficiency management even though this was in violation of EU regulatory policies.

    In the US, the highly unregulated financial sector plunged the entire economy of not only the US but most of the world not once but twice. When hedge fund Long Term Capital Management (LTCM) collapsed in 1998, it was regarded as “too big to fail” and had to be bailed out by the taxpayer. Lessons from that bail-out were certainly not learnt as once again, an utterly unregulated financial sector and its speculative lending practices led to the sub-prime crisis in 2008. That crisis led banks teetering on the edge of collapse, taking with them the hard-earned savings of ordinary consumers. Once again, the US government had to intervene and during the Obama Presidency in 2010, the Dodd Frank Reforms and the Consumer Protection Acts were signed. And predictably, heeding to the demands of the bank lobby which wanted no regulatory oversight, Donald Trump rolled back several provisions of the Dodd Frank Reforms weakening consumer protections. Essentially recreating the conditions for yet another financial collapse.

    In the Indian context, private sector operators, especially politically well-connected ones like the Ambanis, Adanis and the many other crony capitalists that fund the BJP will surely be running the regulators and not the other way around. And every Tom, Dick and Hariharan knows that the Ambanis & Adanis are joined at the hips with Modi & Shah.

    Additionally, as in the US, profits gets credited to the crony capitalists while the taxpayer bears all the losses that these gangsters make. And nobody can change that – and certainly not Narendra Modi who is indebted to these cronies.

    There is the notion that customer service and so forth would improve when privatisation takes place. Perhaps they might. But as someone who has dealt with ICICI, I always end up talking to 3rd party firms who perform the work that ICICI has hived off to them. In reality, I could never get to speak to the person who was initially responsible for the creation of the fixed deposit account. And when the account matured, it was virtually impossible to get the bank to cough up the money. In reality, the customer service is just marginally better at ICICI or other private banks compared to nationalised banks.

    And then you have the not so small issue of financial risk that the consumer faces. Anyone remember SAHARA and the plight of small depositors?

    BOTTOMLINE: The very real risk of regulatory capture, combined with the realities of crony capitalism in India will ensure that the much touted benefits of privatisation will NOT be passed on to citizens. Financial risk will fall on the shoulders of the citizen and once again, he will bear the brunt of the risky moves of privatised banks. But then, the average middle-class Indian voter has a masochistic streak in him – he does not mind getting taken for a ride as long as Modi does it to him. Just ask the millions of bhakths who lauded demonetisation even as they lost their shirts.

    As former President Ronald Reagan said:

    “Politics is supposed to be the second oldest profession. I have come to realize that it bears a very close resemblance to the first”.

    Indian politicians validate that.

  3. What r the criteria n parameters that will b taken into consideration for privatisation of PSBs not known. The parliament shd discuss n make public know all these aspects. Without public discussion the changes in enactments may lead to unnecessary ruckus .

    • Mr Krishna Murthy Kota: Once elected to power, the Indian politician cares not for the public until the next election cycle comes along. And consulting the public is the last thing a politician would do. After all, did the governments consult the people when they unnecessarily changed the names of Bombay, Madras and Bangalore destroying the brand values of these names?

      As someone said:

      “Every 5 years, the masses elect a government; between those 5 years, the classes tell the government what to do”

      The classes have always been crony capitalists that run the government, the plight of the masses does not matter at all. Sad, but true.

  4. So this Govt is committed here after will not push governments scheme in this bank’s to promote now this bank will act like HDFC , ICICI ..as will promote only collateral based loan no priority loan like Agri, Eduction loan ….only personal , home loan will be prevalent …and also minimum balance to be maintained 10K or 15K

  5. If this so, it not 2 psb, it is 6 PSB into this. U can better sell of the Govt so that, the bidder can take care of India. Better than u bjp

  6. Today So many government sectors are going to private.
    we are seeing even a single pie Which effects to government from government maintaining firms will effect to lose then in a long run government understand this is to lose to government Kazana and then they bring new rules and regulations to make them private.
    It’s good to government because they need good governance to people they are intimating to us to take certain step towards while dealing with certain private firms .
    we are aware of share market like that we must be aware of private sector while dealing.
    So we have to go through terms and conditions while dealing with private sector every one knows it.

  7. Banking industry must privatize,so employees of Bank be, perfect, punctual, responsible, & co-operate customer, & mischief control, NPA control, public interest maintain.

  8. Atleast a few sane people like u r reading the economic situation correctly & reacting in a appropriate manner.
    Public Sector Banks hv existed in our country in the last 70 years & hv not been reformed. Politicians in the UPA regime were forcing bank managers to sanction loans left right & center & the result are there for all of us to see in the form of huge NPAs.
    The govt ultimately has to bail out by infusion of Capital in these bad banks with huge NPAs.
    The net impact is increase in fiscal deficit which will never be recovered in future..Do we want our country to be saddled in debt year on year with absolutely no accountability..
    The Service quality will never improve coz, of mindset that we r protected by Unions. There was so much furore due to computerization of the banking industry
    Some States in this country like West Bengal, Bihar, Kerala, r always against Pvt. Sector no wonder they consume products & services of these Companies for years together.
    Modiji govt is bringing structural changes to revitalize our economy & change the old redundant practices some of which has done huge damage to our Country.
    Let’s accept change for a better future of us & our future generations.
    Full & whole hearted support to the govt. Pls go ahead we r with u.. Don’t bother about negative people .
    Farm laws should be implemented without further delay & all antisocial & criminals in the guise of farmers shud be punished severely. India is suffering coz of Jaychands & Mir Jaffers

  9. It is pragmatic move . It has
    been pendingg for very long time. Privatisation will bring competiveness, quality and discipline.

  10. It is pragmatic move . It has
    been pendingg for very long time. Privatisation will bring competiveness, quality and discipline.

  11. It is pragmatic move . It has
    been pendingg for very long time. Privatisation will bring competiveness, quality and discipline.

  12. I want the government to think from the perspective of a private company instead of selling themselves to the private sector.

    There is a strong need of high class Internal Control mechanism in these banks with an intention of taking the banks out of this financial crisis.

    Selling or Privatisation is not the ultimate solution. There are 2 sides of a coin and therefore, decisions cannot be taken on the basis of the upper side only.

    • In short you want government to make moves to encourage government employees to do another nationwide protest like farmers
      and caa ones

    • Very well said Mr Rajesh Kumar ! Rather than improving governance, the Modi government has taken the easy way out for itself and chosen the path that is dangerous for the citizen, viz. privatisation. One wonder what became of the much ballyhooed Modi mantra:

      “minimum government, maximum governance”

  13. In this circumstances the visonery of bank managers support to small business people those who are having good & genuine track record In Repayment commitment hatsoff to them. That I quote” bank may come and banks may go but ethics and servieces observe for ever ” unquote . by the real pillers of development India.

  14. The author of the article us not updated about govt policy under the guidance of NITI Aayog , regarding bank privatisation. SBI, PNB, BOB and Canara Bank are the four banks to be retained by govt in long-term. Others will be gradually privatised. As of this fiscal Bank of Maharashtra and Punjab and Sind Bank will be privatised.

        • Plz let us which private bank is providing service to a common man who even has less than a thousand rupees in his account??
          And give this gyan only once you have clarity on the subject ..For clarity you can also consult Baba Ramdev..

          • Ms Shweta: Almost all my posts here have been sceptical of privatisation efforts. Privatisation of banks will not work in India for host of reasons – poor regulatory frameworks and the danger of regulatory capture are some of the pitfalls of privatisation. Additionally, profit centric and shareholder wealth maximising banks will not cater to the poor.

            My tongue-in-cheek response to Mr Harihar Rana above was a jab at Baba Ramdev more than anything else. But you have veered off at a tangent.

            I fail to see any “gyaan” in your post.

  15. The service of PNB is not good.Even ,they did not bother to give reply to a customer like me ( Age 70 years.). Even the reply of email is pending with PNB for one month. In comparison with private bank like Bandhan Bank ,the services of Bandhan Bank is better than PNB.When Prime Minister is trying to introduce the paperless service like email etc. PNB, Madhyamgram Branch is not giving any reply to me through email till date.

    • The Government of India has overburdened banks with its faaltu ki services like APY, PMJBY etc. Targets and daily reporting that employee can not its services to customers if it wants to be.
      And also remember my friend those who says PSU banks and its employees are not good to bank with,Once the privatisation occurs u will know the value of PSUs.
      Private banks are only for people who have deep pockets otherwise they will not give u value at all.

    • The Government of India has overburdened banks with its faaltu ki services like APY, PMJBY etc. Targets and daily reporting that employee can not its services to customers if it wants to be.
      And also remember my friend those who says PSU banks and its employees are not good to bank with,Once the privatisation occurs u will know the value of PSUs.
      Private banks are only for people who have deep pockets otherwise they will not give u value at all.

      • Yes very true.Once it’s privatized,we will no longer talk face to face with the bank staffs for our problems,…..it will be ….talk to a third party customer care for all problems.Yes, service may be better,with well dress English speaking staffs,but remember not all people get to enjoy this,it always ur deposit and treatment goes hand in hand..

        • An outstanding comment Mr/Ms Dingo !

          There is this widespread myth that privatisation will be the silver bullet that fixes the many problems that afflict nationalised banks. In reality that is unlikely to happen as new problems will get introduced and ordinary households will pay the price. Private operators will relentlessly strive to maximise profits, minimise taxes to the government and transfer financial risk to small depositors i.e. households. Additionally, privatised banks will take a series of outsourcing measures that will essentially create very opaque structures and entities that the depositor has to deal with. Thus, after you have created an account in a privatised bank, for queries about your account, you will be re-directed to some bloody call centre somewhere in some Indian Timbuktu, to cancel your account, you will have to deal with another call centre and so on.

          A consistent feature of the economic transformation of most Western countries, incl. India during the past few decades is the gradual but deliberate transfer of financial risks away from governments and firms to households. Indeed, even the financial risks of ir-responsible, risk taking private actors are borne by households. When Kingfisher, Reliance, Ambani Airports etc. make a profit, they pocket it; when they make losses, the household gets the bill for bailing them out.

          C’est la vie.

    • Good day to you sir me and my father (father aged 73) are long standing customers of pnb . They are very responsive and helpfull. If u face such an issue please complain ur problem u faced on their complaint hotline or customer care. The bank manager of your concerned branch of pnb will call in a few days and ur issue will be solved

    • Bandhan bank…won’t give services to people with Rs. 100 in account….lack of staff is the reason…You should know one thing…people working in private bank are those….who are not selected in public sector banks

  16. Privatization is a failure of govt to manage govt entities with cumbersome proceedings, where bying a pin costs thousands or to sell viable entities at dirt cheap rates only to fund status and not economic upliftment of vote banks

  17. Whenever BJP comes to power, they are selling Government companies one by one. First BJP sold all Hotels owned by Hotel Corporation of India, like Centeur Mumbai, Ashoka Hotels , in and around India and many. Now they are selling profit making Navaratna companies like BPCL, and that’s how they become the richest party in India. How they got money within span of 25years….

  18. This will lead to cheating and exploitation of the public by business houses. A complete sellout to unscrupulous India inc. How are retirees who don’t have pensions to survive if private parties loot public money? I was a strong supporter of Modi Govt. I started getting disillusioned with the Hindu / Hindi fanatics going about dividing the country and Modi’s inability to control them. Now the BJP is busy setting the stage for a terrible oligarchy.

  19. If privatisation is good than why not government should be privatised why we face these corrupt leaders every time with no choice to change them for 5years firstly governence should be given on contract to ambanis isnt it a good idea

  20. If PSB’s are privatized who will lend the farmers, who will run after achieving the targets of priority sector lending, who will provide loans to the SSB, mudra loans.. Private banks look for profit and wouldn’t care about all these.

  21. No private bank has ever implemented govt schemes. Pmjdy, Atal pension yojna, Old age pension etc. After privatisation now these banks will be able to focus on Banking.

  22. It is better to privatise all PSU banks. These banks neednot do APY PMSBY PMJJBY MUDRA Cheap agri credit loans ,Jan Dhan accounts ,petty Education loans,Housing loan for all and other dirty political schemes launched by govt for cheating public.These banks can give good service to NRI HNI Corporates and other creamy layers and earn good businesses without much mork.Moreover government neednot worry about loss of public money as happened with YES bank recently.Privatsation of insurance company helps in reducing claims and helps government to earn more.In government view this is a great decision as government can lauch many more schemes which won’t reach public.

  23. It is better to privatise all PSU banks together.After privatisation these banks neednot do any work relating to opening of JAN DHAN,Cheap Agri loan business,small education loans ,PMJJBY, PBSBY, APY ,PMAY ,MUDRA loans and other cheap loan business and other dirty political schemes launched to get votes and sustain government.So it will help to improve customer service and care for all wealthy customers ,NRI ,Corporates and all others who requires extra care.This can also improve working conditions for staff also.Moreover public money will also be safe as happened before in case of icici bank and yes bank.During crisis of banks government neednot have to worry about loss of money.Only hard earned money of common man would be lost .

  24. Stupidity of the writer . Have you checked balance sheet of bank of baroda??? It’s strong bank and is already absorbed merger.
    Gov will sell weak banks not a strong which generate revenue. Do your homework properly.

    • Why govt will sell banks which is in loss what benefit their freinds will get. They first merged the better banks with them and now will sell them to Adani and ambani

  25. PSBs’ lending of take care of 92% Agricultural lending. Agriculture is our back bone .All Govt Sponserd schemes like PMMY, PMSBY, PMJJBY , PM SWANDHI has been rolled out successfully by PSBs .Privatisation shall weaken the stronghold of regulators and expose India to bigger economic risks.
    It’s ok to think and picturise the privatision but it’s not practical and worthy .

  26. Time as come to to give give service to customers then any organisation can face competition. Since public sector organisation can withstand for sometime with govt support. Growth altimately goes behind quality of service and attitude of people working in the organisation. Union should understand this.

  27. List down the government job of doing governance and find out percentage of them they had succeeded so far.
    If government has no role in doing buissness then government should be run by buissness man only , because they are successfully running the business( like Jet Airways, Kingfishers, J K group, ADAG, DDmas list is long).

  28. What is the fate of the millions who are getting exploited in private sector in India. where there is no uniform HR practices.

  29. The PSBs presently are most disorganised. The harrassment of small deposited is noteworthy to the extent that no work in the bank gets completed in one visit. The staff shows no inclination to work keep wasting time of the customers by indulging in gossip. There is no sense of punctuality. The staff doesn’t obey the managers.
    Hope the privatisation sets them right. The bankers are living on customers money. Why should they be harassed for small jobs like passbook updation.
    I am in favor of privatisation.

    • I believe once the banks are privatized, it will do selective banking- providing best of services to the high depositors and investors . Whereas, the current PSBs are bound by govt. to serve even the poorest. There is less to no discrimination in service being provided to the customer the alike. You should see the employee to customer ratio of some of the PSBs , which is tremendous!

  30. The Government of India is doing very well by privatizing the bank. Bankers are very bashful. If you go to open an account near the years, then he speaks angrily.

  31. It is high time, every single PSB followed by every single PSU be privatised. It is not govt’s business to be in business… Govt’s job is to govern. Can you imagine, a govt in Liquour distribution business… well the State of Kerala is a pioneer in that….i find that ludicrous if not not laughable….

    • Govt should have run the business properly for better revenue generation. Because every govt require money for governance and money comes only from business.
      After selling govt companies, properties govt will come in a bad debt trap in future because the required fund for governance can’t be recovered from individuals in levying heavy tax.
      There are many countries in the world who owned maximum business enterprises under govts control and are much developed than my lovely country.

      Money comes only from business not from service (govt/pvt).

    • Private entity only makes money. Shame on this government. Do visit one private hospital and see the game of day light Looting people. This will happen to Bank customers as well. Just wait watch. Voted 2014,2019 to BJP now 2020 I voted AAP. Will not vote BJP any more. We are done with them.

    • ‘Govt’s job is to govern’

      Organising communal riots and hate speeches, running fake news through IT cell are all part of the current ‘Govt’s job is to govern’.

      But it will not be a problem for you.

    • The day is not far when this country will be ruled by East India company( FDI and Privatisation). FDI in insurance sector has been increased to more than 70%

      Why in China everything is controlled by Govt??.
      Have they privatised Banks and Insurance??

      The current Govt had opposed even 20% FDI limit in Insurance sector proposed by Congress govt in the past.

    • So, basically government sucking people’s blood to run the country is not ludicrous for you, but it making profit is?
      There is no harm is government doing business, providing jobs and most importantly, sucking less blood of middle and lower class.
      In that case, ow about privatising Armed Forces and Nuclear industry as well?

    • If you privatise all PSB then you know very well who bears the burden when they collapse .As of now Govt simply instructs SBI to take over .

  32. The unions have not provided any reason for agitating against the privatization move. Privatization carries fear of employees having no means of exposing grievances to management, isn’t it?

    • The reason is they will have to work. Today walk into any establishment run by governments the service provided is abysmal be it schools, hospitals, banks, companies, tax offices, tehlsidar’s office, state financial institutions, national laboratories etc etc. The failure of last 70 years has been the failure of governments to provide decent services to their voters. Government offices have turned into employment agencies for low efficiency workers. No wonder nothing works in India. But government and bank employees need not worry. This process will remain only on paper. This government is no bold Vajpayee sarkar.

    • These banks will be sold to private sector after transferring the NPAs to a new institution proposed by FM.

      • A good initiative, if govt. goes for privatization, the revenue generation will be more .Very few govt employees think for the organisation, where as in private banks everyone has to think forcibly, because there is no job security . Most of the public money goes into vein in PSU BANKS as we all know how they give loans to the people, the NPA,the condition and working of these PSU BANKS .This system of privatization should apply every where, only the employee and there unions are responsible for these decisions. When people only talk about their rights and forget the duties then government has to take such type of decisions.

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