As Modi Government 2.0 close-to-completes its constitutional obligation of presenting budgets, one major announcement related to privatisation of two public sector banks and a general insurance company is yet to see the light. Additionally, the privatisation of IDBI Bank is expected to be completed by the new government later this year.

At the end of the fiscal year 2022-23, while all the 12 public sector banks are in black, three out of four general insurance companies are in red.

While announcing the Union Budget for fiscal fear 2021-22, Finance Minister Nirmala Sitharaman had said, “Other than IDBI Bank, we propose to take up the privatisation of two public sector banks and one general insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this session itself.”

Since then, two Union Budgets have been presented and nine regular Parliament sessions have taken place, but a bill to facilitate privatisation of public sector banks is yet to be introduced. In fact, every Parliament session since budget 2021 has seenquestions on privatisation of public sector banks and the government has not given any indication about the timeline or action on that.

In the recently concluded winter session of Parliament, Minister of State for Finance, Bhagwat Karad said, “In the Union Budget for the financial year 2021-22, Government’s intent to take up privatisation of two public sector banks and approval of a policy of strategic disinvestment of Public Sector Enterprises was announced.” Furthermore, he said that as per the highlights of the policy, the objectives of the policy included enablement of growth of public sector enterprises through infusion of private capital, thereby contributing to economic growth, new jobs,financing of social sector, and development programmes of the government.

The last big substantial activity amongst PSBs took place in 2019, when the government announced mega consolidation in PSBs effective from April 1, 2022. Under this, Oriental Bank of Commerce and United Bank of India amalgamated into Punjab National Bank, Syndicate Bank into Canara Bank, Andhra Bank and Corporation Bank into Union Bank of India, and Allahabad Bank into Indian Bank.

General Insurance

A bill -- the General Insurance Business (Nationalisation) Act, 1972 -- to pare stakes in public sector general insurance companies was passed in 2021. Though the Bill has a provision that will allow the government to bring down its shareholding below 51 per cent, the government clarified that this is not a bill for privatisation. “We are bringing some enabling provision so that the government can bring in public participation... Indian citizens... the common people’s participation in general insurance companies,” Finance Minister Nirmala Sitharaman had said while introducing the bill.

Among various other provisions, the amended bill seeks to remove the proviso to Section 10B of the Act, which mandates that the Central government must hold no less than 51 percent of the equity capital in a specified insurer. Additionally, the second amendment proposes the insertion of a new Section 24B, stipulating that the Act will cease to apply to such a specified insurer from the date on which the Centre relinquishes control over it.