Budget 2021: Possible sale of stake in LIC and IDBI Bank

The Government of India is planning to announce a sale of 10 to 15 per cent of stake in the country’s biggest insurer, Life Insurance Corp, in the upcoming federal budget, news agency Reuters reported. This came in an attempt to improve public finances by giving it a privatisation push in the deepest economic contraction in decades, said two government sources,

A parliamentary law governing LIC will be amended for assets under management amounting to over $400 billion.

“To facilitate the sale of government stake in the LIC, the government will get a parliament approval to amend the LIC Act,” the first source said. The government had announced plans to sell its stake in LIC last year. That got delayed by legal and administrative hurdles, the official said.

According to Reuters, the government also has plans to sell the stakes in IDBI Bank, Central Bank of India and Punjab & Sind Bank, a source said.

Together, the plan is to raise 2.5 trillion to 3 trillion rupees in the next financial year, officials said, partly to set off the shortfall in the proceeds this year.

Aiming to boost lending in the economy and improve the valuation of state-run banks before selling stakes in them, the government could announce the creation of a bad bank, where toxic assets of banks worth billions of dollars would be transferred, the source said. The objective is to park bad assets of state-run banks into the proposed bad bank and later sell those assets at a discounted price in the market, the official said. “It will help clean up balance sheets of the banks and improve their valuation.”

Finance Minister Nirmala Sitharaman will present the 2021-2022 budget on Monday, that is, February 1, 2021. Sitharaman, along with Minister of State for Finance Anurag Thakur and senior finance ministry officials participated in the traditional halwa ceremony on January 23 to kick-start the compilation of the Budget documents.

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