Indian Govt to reduce public sector banks from 12 to 5 : Report

The first phase of the plan would involve the sale of majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank, a government official told Reuters.

According to the report, the government is currently formulating a privatisation proposal which will include this plan, said an official.

The government is working on the privatisation plan to sell stakes in companies in non-core sectors to raise money at a time when economic growth is absent due to the coronavirus pandemic.

Reportedly, government committees and the Reserve Bank of India (RBI) have from time to time said India should not have more than five public sector banks.

"The government has already said that there will be no more mergers (between state-owned banks) so the only option for them is to divest stakes," a senior official at a public sector bank was quoted as saying by Reuters.

Last year, the Centre had merged 10 banks into some bigger banks and the unmerged banks left will be privatised, the report said.

The divestment is unlikely to happen in this fiscal due to unfavourable market conditions due to Covid-19.

At the end of September 2019, Indian banks had bad loans of Rs 9.3 lakh crore equivalent to about 9.1 per cent of their total assets, which the government expects to double due to the coronavirus crisis, said the report.

The government may need to infuse nearly $20 billion to bail out state run banks from the situation, the report added.