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There will be many important reforms in the banking sector; Privatization and disinvestment of IDBI Bank on the agenda

(Kumar Dipankar)

New Delhi, Dec 26 (PTI) Privatization of public sector banks and strategic disinvestment of IDBI Bank along with significant reforms in the banking sector will be on the agenda of the government in 2022.

However, experts say that due to the spread of the new form of corona virus, Omicron, there may be some impediment in the pace of reforms.

According to the data, despite the outbreak of the second wave of the pandemic, the banking sector performed very well in the passing year 2021.

With the help of the government’s multi-pronged strategy – Approval, Resolution, Recapitalization and Reform – the bad debt (NPA) of the banking sector has come down to Rs 8,35,051 crore as on March 31, 2021.

According to the Financial Stability Report (FSR) released by the Reserve Bank of India (RBI) in July 2021, the gross NPA ratio of notified commercial banks may increase from 7.48 per cent in March 2021 to 9.80 per cent in March 2022.

The net profit of public sector banks (PSBs) increased to Rs 14,012 crore in the first quarter and increased to Rs 17,132 crore in the second quarter ended September 2021.

The total profit (Rs 31,114 crore) of these banks in the first half of the current financial year is close to the total profit (Rs 31,820 crore) earned in the previous financial year (2020-21).

Similarly, other banks including private sector HDFC Bank, ICICI Bank and Kotak Mahindra Bank also made good profits with reduction in bad loans.

Finance Minister Nirmala Sitharaman, while releasing the Public Enterprise Policy (PSE) in the Budget for 2021-22, had said that PSUs would be disinvested in sectors other than the four strategic sectors.

Under the PSE policy, the Finance Minister had also announced the privatization of two public sector banks in the budget.

The Banking Laws (Amendment) Bill, likely to be introduced in the upcoming budget session, is expected to help bring down the minimum government stake in PSBs from 51 per cent to 26 per cent.

According to sources, the government can first privatize the Central Bank of India and Indian Overseas Bank. However, in a recent reply to Parliament, Sitharaman had said that the cabinet has not taken any decision on the privatization of the two PSBs.

The Cabinet in May had given in-principle approval for the strategic disinvestment of IDBI Bank along with the transfer of management control. The central government and LIC hold over 94 per cent stake in IDBI Bank.

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