No specific proposal to amalgamate more PSBs under consideration: MoS Finance

There is no specific proposal to amalgamate more public service banks (PSBs) is currently under consideration of the government, says the Minister of State (MoS) Finance. In a written reply in Lok Sabha, the MoS Finance said there was no specific proposal as such.

It said that after consulting RBI, the government approved that respective Board of Public Sector Banks (PSBs) may consider amalgamation. “Bank Boards concerned considered the amalgamation and approved the same in-principle. The government, after considering inputs of RBI and in-principle approval and inputs of banks, amalgamated Vijaya Bank and Dena Bank into Bank of Baroda w.e.f. 1.4..2019 and Oriental Bank of Commerce and United Bank of India into Punjab National Bank, Andhra Bank and Corporation Bank into Union Bank of India, Syndicate Bank into Canara Bank, and Allahabad Bank into Indian Bank, w.e.f. 1.4.2020,” the statement said.

In February, the Union Finance Minister Nirmala Sitharaman, while presenting the Budget 2021-22, had announced the government’s intention to privatize two PSBs as part of disinvestment drive to garner Rs 1.75 lakh crore. However, before repealing the bank nationalization laws, a procedure has to be developed for transition of the PSBs from under these Acts to the Companies Act.

Reports highlight that as many as 14 private banks were nationalized in 1970 by the Indira Gandhi government, followed by another six banks in 1980. The BJP-led government is trying to break the hold of the public sector by encouraging private players to acquire government assets. The NDA government has undertaken a series of consolidation exercises in the public sector banking space.

The PSBs have managed to raise a record Rs 58,700 crore from markets in FY2020-21 through a mix of debt and equity to enhance capital base. This included Rs 4,500 crore raised by Mumbai-based Bank of Baroda from qualified institutional placement (QIP). Punjab National Bank mobilized Rs 3,788 crore through share sale on private placement basis during the financial year ended March 31, 2021. And the Bengaluru-based Canara Bank raised Rs 2,000 crore from QIP.

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In regards to the insurance sector, a bill to amend the general insurance law to allow the government to pare its stake in state-owned insurers was introduced in the Lok Sabha on Friday.  Sitharaman insisted that it will not lead to privatization. She said the General Insurance Business (Nationalization) Amendment Bill 2021 will help generate required resources from the Indian markets so that the public sector general insurers can design innovative products.