The Union Government is mulling several policy steps for the Indian banking sector, including setting up of a bad bank and privatisation of few state-run banks. According to sources, there are talks of reducing the number of public sector banks (PSBs) to four from the current 12.
This is likely to be part of the government's new strategic disinvestment policy, which is also likely to include the insurance sector. This would be a major move towards meeting the government's disinvestment targets. The most significant feature of the upcoming policy would be the inclusion of financial sectors under its ambit. Though privatization is on the cards, further recapitalization of PSBs cannot be ruled out.
According to people in the know, the government may go ahead with another round of recapitalization, to enable the banks to create a strong buffer amid the pandemic. Last year, the Niti Aayog suggested the privatization of three banks - the Punjab & Sind Bank, UCO Bank and the Bank of Maharashtra, according to people in the know. Further, the talks of stake sale in banks under the new policy, came after the merger of 10 public sector banks came into effect on April 1, 2020. The disinvestment plans have been hit by the pandemic.
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