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Bank Privatisation Is Not Easily Accomplished
Those who urge the wholesale privatisation of public sector banks do not seem to have given adequate thought to the mechanics of bank privatisation in India. Given the present regulatory regime for private bank ownership in India, there are formidable obstacles to privatising even what is regarded as an obvious candidate for privatisation—the IDBI Bank. The challenges in privatising several PSBs must not be understated.
Bank privatisation is in the air again. The Union Budget for 2021–22 had mentioned plans to privatise two public sector banks (PSBs). There has been no movement in that direction so far. The privatisation of PSBs will require amendments to the Bank Nationalisation Act. There has been talk of placing a bill before Parliament for the purpose but this has not happened.
Now, we are told that the proposal to privatise the Industrial Development Bank of India (IDBI) Bank has been revived. For historical reasons, the IDBI Bank is classified as a “private bank” despite the government and Life Insurance Corporation (LIC) together owning the overwhelming share of the bank’s equity. The government now proposes to hand over a controlling equity interest to a private buyer or buyers.
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