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June 30, 2022

Indian government looking to divest entire stake in two banks to lure investors

Indian authorities are open to divesting entire stake in the two government-backed banks that are slated to be privatised.

The move is aimed at wooing potential investors, the Financial Express reported citing a senior official.

As per the initial plan, the government had planned to hold a 26% stake in these banks.

Indian government’s think tank, NITI Aayog, had earlier recommended the privatisation of the Central Bank of India (CBI) and Indian Overseas Bank (IOB).

However, the government – which controls 96.38% in IOB and 93.08% in CBI – is yet to announce the name of banks it will privatise.

Notably, the government is working on legislation to facilitate the privatisation of banks, which is expected to be introduced in the monsoon session of parliament.

It may propose to bring down the minimum government holding in certain public-sector banks (PSBs) to zero from the current 51%.

While presenting the Budget for 2021-22, finance minister Nirmala Sitharaman announced the privatisation of two PSBs and one general insurer.

Last month, financial services secretary Sanjay Malhotra revealed the government was close to finalising plans to privatise two state-run lenders.

Earlier this month, media reports emerged that the government could merge IDBI Bank with private banks.

Fairfax India Holdings had expressed interest in buying the government’s 45.48% stake in the bank.

Life Insurance Corporation of India (LIC), which recently got listed on the Indian bourses, holds the remaining 49.24% stake in IDBI Bank.

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