India is expected to commence privatisation of the banking sector with small state-owned lenders such as Punjab & Sind Bank and Bank of Maharashtra (BoM), according to local reports.
This comes days after Indian Finance Minister Nirmala Sitharaman in the budget speech announced plans to privatise two state banks, in addition to IDBI Bank. However, she did not specify the names of the two banks triggering speculations.
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Notably, the Indian Government has enabled the merger of 13 banks into five entities earlier.
Apart from State Bank of India (SBI) and five merged entities, there are six public sector banks in the country.
They are Bank of India, Punjab and Sind Bank, Bank of Maharashtra, Indian Overseas Bank, Central Bank of India and Uco Bank.
Currently, the last three lenders are under prompt-corrective action (PCA) and may not trigger investor interest if privatised.
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By GlobalDataICRA financial sector ratings sector head and vice-president Anil Gupta told local publications that the government is also unlikely to start the privatisation process with Bank of India due to its large size, making Punjab & Sind Bank and BoM the likely candidates for the move.
On the other hand, several banking unions have opposed the privatisation plans stating that such a move will impact the stability of the sector.
In the budget, Sitharaman also proposed setting up a bad bank to manage soured loans.
