Government to not privatize public sector banks in COVID-19 Pandemic

Government would not privatize public sector banks. Because, of low valuations and mounting stressed assets amid the COVID-19 crisis.

Government would not privatize public sector banks. Because, of low valuations and mounting stressed assets amid the COVID-19 crisis. Now, four public sector banks are under the RBI’s Prompt Corrective Action framework. This puts several restrictions on them. Which includes on lending, management compensation and directors’ fees. However, it does not make any sense to sell to the following lenders. These include Indian Overseas Bank, Central Bank of India, UCO Bank and United Bank of India. Since, there will not be any suitors from the private banking space. Hence, Government would not privatize public sector banks.

Also, the Government will resist selling of strategic sectors. Moreover, in the last years hardly any public sector bank has gone for stake holding. Furthermore, Government stake in some PSBs has gone past 75%.As successive capital infusions for meeting have mandatory regulatory ratios. Not only has the COVID-19 Pandemic halted the process of recovery of PSBs. But also it is going to have an strong impact on private sector banks.

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Private-Semi Private To Public Sector Bank Mergers 

Still, the government is following the process of consolidation of PSBs. Firstly, it started with the merger of State Bank of Saurashtra. With its parent State Bank of India in 2008. Lastly,  State Bank of Indore was merged with SBI in 2010 as well. After an over six-year gap SBI again fused its remaining five subsidiaries. Which were State Bank of Patiala, Bikaner and Jaipur. As well as State Bank of Mysore, Travancore, Hyderabad. Along with Bhartiya Mahila Bank. This was effective by April 2017.

Firstlt, Vijaya Bank and Dena Bank were merged with Bank of Baroda from 1st April, 2019. This created the third-largest lender of the country.  An exercise took shape beginning April this year. As per the consolidation plan the following happened. Secondly, Oriental Bank of Commerce and United Bank of India were merged into Punjab national Bank. Thirdly, Syndicate into Canara Bank. Lastly, Andhra Bank and Corporation Bank  merged into Union Bank of India.

Henceforth, Allahabad Bank into Indian Bank. Following the consolidation, there are now seven large public sector banks, and five smaller ones. There were as many as 27 PSBs in 2017.