Uncertainty looms over the privatisation of two public sector banks and one general insurance company as announced in the Budget last year. There is no clarity yet if the government will introduce a Bill in the Budget session for the privatisation of public sector banks.
“Other than IDBI Bank, we propose to take up the privatisation of two Public Sector Banks and one general insurance company in 2021-22. This would require legislative amendments,” Finance Minister Nirmala Sitharaman had announced while presenting the Budget for FY22 on February 1 last year. She had also talked about bringing a legislation in last year’s Budget session itself.
Now, as Sitharaman gets ready to present the Budget for FY23, her ministry is also highlighting ‘Delivery of Budget Promises’ with a hashtag #Budget2021Recap . However, as on date, there is no indication of an announcement related to the privatisation of banks and general insurance company. Finance Ministry officials did not respond when BusinessLine tried to find out the latest status on this issue. .
The privatisation of two public sector banks has been a challenge for the government. First, the Bill facilitating privatisation could not be introduced in the Budget session as it was curtailed due to the pandemic. Then a Bill titled, ‘The Banking Laws (Amendment) Bill, 2021’, was listed as a part of legislative business for the Winter session of Parliament. According to the Lok Sabha bulletin, the purpose of this Bill was “to effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatisation of two Public Sector Banks”.
Agitation by bank employees
However, the Bill could not be introduced in the Winter session. Sources said that considering polls in five States, including Uttar Pradesh, the government does not want to take steps that could have an impact poll prospects. Also, strong agitation by bank workers pushed the government on back foot, they said.
As on date there are 12 public sector banks, including State Bank of India. Banking is part of strategic sectors. Under new ‘Disinvestment/Strategic Disinvestment Policy’, there will be bare minimum presence of the public sector enterprises in the strategic sector. The remaining CPSEs in the strategic sector will be privatised or merged/subsidiarised with other CPSEs or closed down.
General Insurance Company
The government did manage to enact a law to amend the General Insurance Business (Nationalisation) Act. This amendment removes the requirement that the Central government holds not less than 51 per cent of the equity capital in a specified insurer. Though Sitharaman had repeatedly said that this new Act is not for the privatisation of the General Insurance Company but to help in raising more and more resources, the general feeling is that this Act will help in achieving the privatisation of a general insurance company.
As on date there are five general insurance companies – New India Assurance Company, United India Insurance Company, Oriental Insurance Company, National Insurance Company and Agriculture Insurance Company. Apart from these, there is a re-insurance in public interest, the General Insurance Corporation of India.