Centre Likely to Sell its Stakes in Central Bank & IOB

Centre Likely to Sell its Stakes in Central Bank & IOB

The Centre intends to sell its stake in Central Bank of India and Indian Overseas Bank (IOB) as part of its mega privatisation move has been hinted in the Union Budget in February.

Meanwhile, the two banks have been recommended for disinvestment by government think tank NITI Aayog, Bank of India (BoI) that could be a potential candidate for sale, sources familiar with the deliberations.

The proposal from the government think tank is being vetted by the disinvestment and financial services departments, ministry sources said. The exercise is part of a multi-stage process for finalising entities that are to be taken up for privatisation.

While NITI Aayog has been tasked with recommending the names, it is then reviewed by the inter-ministerial group of officers and subsequently by a group of ministers, before the Union Cabinet puts its seal of approval.

Sources in the department of investment and public asset management (Dipam), which handles the government’s asset sales programme, said it will examine the proposal with the department of financial services and discuss the legislative changes needed for the privatisation of the state-run banks. “The timeline will depend on the legislative changes required,” the sources added.

Besides, the issue will have to be discussed in detail with the RBI as the law and regulations provide a special dispensation for state-run entities in several areas.

The Cabinet lately cleared the decks for the sale of government stake in IDBI Bank, but sale of the Centre’s holding in the two staterun entities will break new ground as the Narendra Modi administration has embarked on an ambitious privatisation drive, which for the first time includes the financial services space.

The government is hoping to conclude the sale of IDBI Bank stake during the current financial year.

Among the dozen staterun lenders, NITI Aayog had set its eyes on the six entities that were not part of the merger initiative a few years ago and included Bank of Maharashtra, Punjab & Sind Bank and UCO Bank in addition to BoI, IOB and Central Bank.

However, was of the view that the better off entities would attract greater interest, resulting in the shortlisting of IOB and Central Bank. Based on the latest share price, the two entities are valued at around 44,000 crore with IOB’s market cap estimated at 31,641 crore.