Shares of Central Bank of India and Indian Overseas Bank (IOB) surged by about 20% each on the BSE on Monday amid buzz that the government has moved closer to privatising these two lenders, in sync with Niti Aayog’s suggestion.
The stock of Central Bank shot up 20% to Rs 24.30 per share, while IOB’s rose 19.8% to Rs 23.6.
The government may also amend the Banking Regulation Act and Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 (nationalisation laws) as early as in the monsoon session of the Parliament to privatise the banks.
The sell-off plan, announced in the Budget in February, is part of the government’s broader divestment goals for FY22, and includes privatisation of several other non-financial state-owned entities as well as listing of insurance behemoth LIC. The government has set its overall disinvestment target for FY22 at Rs 1.75 lakh crore, about three-and-a-half times the actual realisation last fiscal year.
Global rating agency Fitch recently said India’s plan to privatise two public-sector banks in FY22 could be delayed, as the “bold move” faces risk from political opposition and structural challenges, including heightened balance-sheet stress in the wake of the Covid-19 outbreak.
Government officials said the work was in full swing and the names of the eligible candidates would be formally declared soon.