To make any government bank of the country private, first of all, the Banking Companies Act, 1970 will have to be changed. Also, the government will need to make changes in the Banking Companies Undertaking Act, 1980.
The government is considering a proposal to bring 11 government (PSU) banks of the country under the Companies Act. There are many companies in the country who have shown interest in purchasing these PSU banks. If the government banks come under the Companies Act, then the nationalized bank’s reputation will be taken away. Major changes can also be seen in the system of functioning. Right now this is a proposal that the government is considering.
Bringing banks into the Companies Act directly means that the Nationalization Act should exclude them and open the way for disinvestment. Disinvestment here means privatization. If this happens, these banks will work like a professional company. If this proposal is accepted, then these banks will not need to get permission from Parliament for their disinvestment. We can say that due to the Companies Act, banks will go on the path of disinvestment and their privatization will become easier.
These companies can buy stake
In the disinvestment of these banks, a big issue can come up with the management board. How much a private company can participate in a government bank, how much will be its participation in the ownership and on what basis the Reserve Bank will allow it, it will be a matter of all to be seen. Funds like KKR, Blackstone have shown interest in PSU bank purchases but it is not yet clear how the government will take this work forward.
The screw can be trapped due to ownership
If a private bank wants to buy a stake in a government bank, then there are certain rules and regulations from the Reserve Bank. There are strict rules regarding ownership in this. According to the business channel ‘CNBC Awaaz’, if public sector banks come under the Companies Act, then the way of ownership will be cleared and private banks will be able to buy a stake in public sector banks. However, the approval of the Cabinet will be necessary for this and in the next parliamentary session, something can be done this time. The new rule also has to be seen whether a private bank can buy a stake in another private bank.
Banking Companies Act will have to change
To make any government bank of the country private, first of all, the Banking Companies Act, 1970 will have to be changed. Also, the government will need to make changes in the Banking Companies Undertaking Act, 1980. If both laws are changed, then the way of privatization of public sector banks will be cleared. It is believed that the government can bring a bill for this in Parliament. Both these laws nationalize banks right now, but after coming into the Companies Act, the provisions of privatization will apply to banks.
What is the preparation of the government
The government has already announced that some banks will be privatized. With this step of disinvestment, the government can get 1.75 lakh crore rupees. According to Finance Minister Nirmala Sitharaman, apart from IDBI Bank, there is a proposal to privatize two government banks and General Insurance Company. The government is working with the Reserve Bank to take steps in this direction. RBI is also working on this and the rules related to banking sector can be released soon.
