New Delhi: Chastened by its experience with the contentious farm reforms laws, the Modi government has apparently decided to put on hold its plans to privatise two public sector banks, fearing that protests by bank unions could hurt the ruling Bharatiya Janata Party (BJP) in assembly elections early next year.
Senior officials in the government said on condition of anonymity that the fear of protests was one of the reasons why the government didn’t introduce the amendments in the banking laws, to privatise state-owned banks, in the Winter Session of the Parliament.
“The draft of the bill was ready for Cabinet’s consideration. The sense is that there is a pause on these bills until the elections are over. So, it seems like this would now be taken up only in the second half of the Budget session or maybe later,” a government official told ThePrint.
The Lok Sabha bulletin had listed Banking Laws (Amendment) Bill, 2021 to effect changes in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 regarding privatisation of two public sector banks (PSBs).
The changes in these laws would have ensured that the government could reduce its minimum shareholding in PSBs from the current 51 per cent to 26 per cent without diluting its control over the management of the banks.
In response to a question in Rajya Sabha on privatisation of two PSBs, Finance Minister Nirmala Sitharaman said: “Consideration of various issues related to disinvestment is entrusted to the Cabinet Committee designated for this purpose. Decision by the Cabinet Committee has not been taken in this regard.”
In Budget 2021-22 in February this year, FM Sitharaman had announced that other than IDBI Bank, the government would privatise two PSBs and one general insurance company in the current fiscal.
While the banking bill amendments could not be brought in the Parliament, changes to the General Insurance Bill were made in the Monsoon Session to privatise one state-run general insurance company.
The United Forum of Bank Unions, an umbrella body of nine unions, held a two-day nationwide strike from 16 December to protest the government’s privatisation plans. Close to nine lakh employees of various state-owned banks participated in the strike.
“There are lessons to be learned from what happened with the farm laws bill. But that does not mean that the government will stop on its reform agenda,” said a second official.
On 19 November, Prime Minister Narendra Modi withdrew the three controversial farm laws that had drawn the ire of farmers, especially from those of western Uttar Pradesh and Punjab.
Some economists like N.R. Bhanumurthy support the idea that privatisation of state-owned banks drives the government away from its social agenda of financial inclusion.
“The fear of privatisation is that it can go to one extreme and derail the government’s agenda from why the public sector banks came into being in the first place. One should not only look at the profitability of these banks as a measure for privatisation,” said Bhanumurthy, who is Vice-Chancellor at BR Ambedkar School of Economics University, Bengaluru.
The government had last year merged 10 PSBs into four, leaving the count of PSBs to 12 currently.
According to government officials, NITI Aayog has recommended four mid-sized PSBs — Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India — as part of the privatisation push.