As per the sources, in the current fiscal the privatization of any public sector bank (PSB) is very unlikely due to their fewer valuations and escalating stressed assets during the COVID-19 crisis. Now four public sector banks are under the RBI’s Prompt Corrective Action (PCA) framework, which brings certain restrictions on them which include, lending, management compensation, and directors’ fees. The sources also mentioned that there is no sense in any business to sell these lenders like Indian Overseas Bank (IOB), Central Bank of India, UCO Bank, and United Bank of India. Against the private banking space, there will not be any suitors for them.
The sources added that the government will refrain from the ache sale of its entities, peculiarly if they are in strategic sectors. Sources also said that, other than outright sale, barely any public sector bank has gone for decreasing the stake in the last many years as the valuation has been pessimistic. Almost 75 percent stake of public sector bank (PSBs) has been gone because of the consecutive infusions for meeting mandatory regulatory ratios. Due to the COVID-19 pandemic, it has not only affected the process of recovery of PSBs but also affects an adverse impact on the financial health and growth of private sector banks. About the better financial health of the PSBs, Finance Minister Nirmala Sitharaman had not declared any capital infusion them in Budget 2020-21 in February this year. For the past few years, the government is following the process of consolidation of PSBs.
Firstly, it initiated the merger of State Bank of Saurashtra with its parent State Bank of India (SBI) in 2008. Afterward, State Bank of Indore was merged with SBI in 2010. After a six-year interval, SBI again merged with its remaining subsidiaries like State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore, State Bank of Hyderabad along with Bharatiya Mahila Bank (BMB) which emerged in April 2017. On April 1, 2019, as the motive of creating the third-largest lender of the country Vijaya Bank and Dena Bank have emerged with Bank of Baroda. A huge consolidation exercise took shape starting April this year. As the explanation of consolidation plan, Oriental Bank of Commerce, and United Bank of India were amalgamated into Punjab National Bank, Syndicate Bank emerged into Canara Bank, Andhra Bank and Corporation Bank amalgamated into Union Bank of India and Allahabad Bank emerged into Indian Bank.
