PSB privatisation | Business Upturn

Cabinet has not taken any decision on privatisation of two PSBs: FM Nirmala Sitharaman

Malvika Choudhary — Tue, 21 Dec 2021 15:55:25 +0000

Clouds of confusion swirl around the privatization of public sector banks. The parliament informed on Tuesday that the union cabinet is yet to decide on the matter.

Earlier, in its union budget for FY22, the government notified its intent to privatize the two PSBs in the year and approval of a policy of strategic disinvestment of public sector enterprises, finance Minister Nirmala Sitharaman said in a written reply in the Rajya Sabha on Tuesday.

The matter of privatization of PSBs coincided with the 2 days strike by the bank employees. The employees argued that the decision will seize the money from the public hands and hand it over to the private houses. The objective of the policy was to enhance the public sector by infusing private capital, technology and best practices, according to the union finance minister.

“Consideration of various issues related to disinvestment is entrusted to the Cabinet Committee designated for this purpose/ Cabinet. Decision by the Cabinet Committee/Cabinet has not been taken in this regard,” the FM added.

Punjab Bank Employees’ Federation president PR Mehta, said, “Public sector banks act as catalysts in economic development of the nation in general and particularly for underprivileged sections of the society and backward regions. Nationalised banks have played a major role in the development of agriculture, small trade, small business, SSI, transport and in upliftment of weaker sections of the society. In 2008, when the world economy had plunged into a deep financial crisis and meltdown, it was PSBs, which helped the Indian economy survive.”

Discussing privatisation of PSBs with centre, says Shaktikanta Das

Nitin Anand — Thu, 25 Mar 2021 10:05:23 +0000

On Thursday, March 25, while addressing the Indian Economic Conclave, Reserve Bank of India Governor Shaktikanta Das said that RBI is discussing with government on the privitisation of Public Sector Banks and he also added that “process will go forward”.

Last week, Finance Minister Nirmala Sitharaman had assured that not all banks will be privatised and wherever it happens, the employees interest will be protected.

Das spoke on the current Covid situation that now the government is able to tackle the increasing number of Covid cases in India.

Das also spoke about current economic situation in the country and said that RBI will try to keep rupee stable and assures that there is no fight between central bank and bond market in India. Das further added that RBI is committed to use all policy tools to support the revival of economic activity in India.

Governor also addressed on the revival of economic activity and said, “Don’t see downward revision in RBI’s 10.5 per cent growth estimate for FY22. The RBI has predicted a growth rate of 10.5 per cent for India’s GDP for the next year.”

Discussing upon the current situation of Cryptocurrencies in India, Das added, “I don’t think there is difference of opinion between RBI and Government on cryptocurrencies”.

BPCL to sell Numaligarh Refinery stake for Rs 9,876 crores

Ushma Ghosh — Tue, 02 Mar 2021 05:42:11 +0000

Privatisation-bound Bharat Petroleum Corporation Ltd (BPCL) on Monday said it will exit Numaligarh refinery in Assam by selling its entire stake to a consortium of Oil India Ltd and Engineers India Ltd for Rs 9,876 crore. The sale of Numaligarh Refinery Ltd clears the way for the privatisation of India’s second-largest fuel retailer.

A consortium of Oil India Ltd, Engineers India Ltd, and the Government of Assam expressed interest in buying the stake and the BPCL board on Monday approved the sale. Bharat Petroleum Corporation (BPCL) has decided to sell its entire 61.65% stake in Numaligarh Refinery (NRL) for nearly ₹9,876 crores to a consortium of Oil India (OIL) and Engineers India (EIL) and the Assam government.

In the event of the State government, which holds a 12.35% stake in NRL and has the right of the first offer, deciding against acquiring the shares being offloaded, the consortium of the two companies will be the buyer. The share purchase agreement, with the buyers, will be entered into after BPCL shareholders approve the stake sale. The transaction is expected to be completed within a month of obtaining all requisite approvals, BPCL informed the stock exchange on Monday. The development assumes significance as the Centre had decided to delink NRL ahead of the proposed divestment of BPCL. The consolidated total income of NRL in 2019-20 was ₹14,244.29 crore or 4.29% of the consolidated total income of BPCL. The consolidated net worth of NRL as of March 31, 2020, was ₹5,292 crore, which is 14.18% of the consolidated net worth of BPCL.

Last month, OIL and EIL had announced the decision to bid as a consortium for the 61.65% stake. The exact percentage of the stake of OIL and ElL will depend on the extent of the right of first offer (ROFO) to be exercised by the Assam government, they had said.

“The board of directors of BPCL at the meeting held on March 1, 2021, has approved the proposal for sale of entire equity shares of 445.35 crores held by BPCL in NRL to a consortium of OIL and EIL and to Government of Assam,” the firm said in a filing to the stock exchanges. Total consideration would be Rs 9,875.96 crore.

The consortium of OIL and Engineers India Ltd is likely to acquire 49% and the rest 13.65% will be sold to the Government of Assam. NRL operates 3 million tonnes per annum oil refinery in Assam. OIL currently holds 26% equity in NRL while the Government of Assam has around 12.35%.

Department of Investment and Public Asset Management Secretary Tuhin Kanta Pandey in a tweet said, “privatisation process of BPCL moves ahead with BPCL Board deciding to exit from NRL at a consideration of Rs 9,875.96 cr for its 61.65% stake with the transfer of control. OIL, EIL and Government of Assam will be picking up the stake”.

Post NRL sale, BPCL would be left with three refineries at Mumbai, Kochi (Kerala) and Bina (Madhya Pradesh). The government is selling its entire 52.98% stake in BPCL in the nation’s biggest privatisation to date. Vedanta Group and private equity firms Apollo Global and I Squared Capital’s Indian unit Think Gas has put in an expression of interest for buying the government’s stake.

The sale of NRL is the first step towards the disinvestment of BPCL. The government has already indicated that it expects to complete BPCL privatisation by the first half of the fiscal beginning April (2021-22). The sale is key to achieving the Rs 1.75 lakh crore disinvestment target set for 2021-22. BPCL will give the buyer ownership of around 15.33 per cent of India’s oil refining capacity and 22 per cent of the fuel marketing share.

NRL is looking to expand its refining capacity from 3 million tonnes per annum to 9 million tonnes a year at an investment of Rs 22,594 crore. The project is expected to be completed by 2024. The expansion also involves setting up of crude oil pipeline from Paradip in Odisha to Numaligarh and a product pipeline from Numaligarh to Siliguri in West Bengal. In the run-up to the privatisation, BPCL last month agreed to buyout Oman Oil Company’s shares in the Bina refinery project for about Rs 2,400 crore.

BPCL holds a 63.68 per cent stake in Bharat Oman Refineries Ltd (BORL), which built and operates a 7.8 million tonne oil refinery at Bina. It will buy 36.62% of the equity share capital from OQ S.A.0.C. (formerly known as Oman Oil Company S.A.0.C.) for Rs 2,399.26 crore. BORL was incorporated in February 1994 to build a refinery at Bina. The unit initially could turn 6 million tonnes of crude oil annually into fuel, which was subsequently raised to 7.8 million tonnes.

Bank of Maharashtra, Bank of India, Indian Overseas Bank and Central Bank of India shares gets boom of 10% on Potential Privatisation

Chirag Jha — Tue, 16 Feb 2021 06:21:10 +0000

On February 16, shares of Bank of Maharashtra, Bank of India, Indian Overseas Bank and Central Bank of India gained more than 10 percent each in the early trade. The reports of privatisation of these banks lead to this boom in shares.

According to some reports, these four are the state run banks which would be privatised in the FY 21-22.

Two officials told Reuters on condition of anonymity as the matter is not yet public, the government has shortlisted four mid-sized state-run banks for privatisation, under a new push to sell state assets and shore up government revenues. The four banks on the shortlist are Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India. Two of those banks will be selected for sale in the 2021/2022 financial year which begins in April.

Bank of India has a workforce of about 50,000 and Central Bank of India has 33,000 staff, while Indian Overseas Bank employs 26,000 and Bank of Maharashtra has about 13,000 employees, according to estimates from bank unions. Bank of Maharashtra’s smaller workforce could make it easier to privatise and therefore potentially one of the first to be sold, the sources said.

On Tuesday, Bank Of India touched 52-week high of Rs 66 and quoting at Rs 64.10, up Rs 5.25, or 8.92 percent. Also Bank of Maharashtra touched 52-week high of Rs 18.50 and quoting at Rs 18.35, up Rs 2.45, or 15.41 percent.

Union Budget 2021: Big highlights for common man and working class

Chirag Jha — Mon, 01 Feb 2021 09:01:30 +0000

Union Budget presented by Finance Minister Nirmala Sitharaman didn’t have much for middle class people as no changes were made to the personal income tax slab. However, senior citizens who are above the age of 75 were offered benefit, they will not have to file Income Tax (I-T) returns.

Also, no increases in direct or indirect taxes were made by Finance Minister, except petrol and diesel, which may be seen negative as it would lead to increase in transportation costs and could add to inflation.

Next, Finance Minister Sitharaman announced a “Vehicle Scrapping Policy” to control pollution and to improve air quality. Vehicles will undergo a fitness test in Automated Fitness Centres. In case of personal vehicles, it’s 20 years and in case of commercial vehicles, it’s 15 years.

In her Budget speech, FM Sitharaman revealed government’s plan for selling minority stake in large entities like LIC. The aim behind partially privatising these PSUs is to boost its finances and to raise resources.

FM also proposed the plan of privatising two more public sector banks (PSBs), other than IDBI Bank, and one insurance company (other than LIC) in the fiscal year 2021-22. It’s a big positive side for these PSBs as it could result in bringing additional funds.

Policy makers in talks to ease foreign bank participation during PSB privatisation

Akanksha Yadav — Fri, 20 Nov 2020 08:59:58 +0000

Reportedly, Indian policymakers are currently in discussions to formulate ways to revamp and open up the banking sector by easing procedures for corporate and foreign bank participation in acquiring public sector banks which the central government is deciding to privatise.

As of now, industrial houses that generate 60 percent of their turn over from non-financial entities are not allowed to apply for bank licences and even their equity participation is limited to 10 percent since regulators are afraid that this could risk the financial stability due to the propensity of the corporates to skim banks for ‘self-loans.’

According to ET Now, currently, there’s a rethinking going on over the existing policy between policymakers and that the discussions are at an “early stage”. The government and the central bank may move with “abundant caution” and will consider global as well as prior experience.

Greater regulatory vigilance in terms of preferring corporate players with a long term 10-year business plan, “Fit & Proper Criteria” for corporate participation for taking equity in banks, tighter norms for related party transactions could be required to ensure no excessive concentration or risks to financial stability.

“We need to open up the banking system but the move will be designed with ‘abundant caution’ and will need stonewalling from misuse. Opening up banking sector will come with greater regulatory vigilance on banks, fin institutions,” officials confirmed.

Policymakers are also on discussions to allow foreign banks with Indian subsidiaries to participate in buying government stakes when state-owned banks like Central Bank of India, Bank of India, Punjab and Sind Bank, IOB and UCO Bank get privatised.

The banking sector has been faced with rising bad loans leading to declining capital adequacy ratios and even failures in some cases. Recently, Yes Bank was saved, all thanks to the government and RBI intervention when SBI lead consortium infused more capital into the private lender to save it from bankruptcy. Last week the government and RBI had to intervene to rescue the Lakshmi Vilas Bank by proposing a merger with the Indian subsidiary of DBS Bank, though LVB’s investors are opposing the merger.

Besides DBS, only SBM Bank is a foreign bank that has Indian subsidiaries. SBM Bank (India) Limited (Subsidiary of SBM Group) and DBS Bank India Limited have been issued a licence on December 6, 2017, and October 4, 2018, respectively for carrying on banking business in India through a wholly-owned subsidiary.

The widening of this move to allow foreign banks to buy public sector banks when the government decides to privatise them will not only lead to an increase in competition in the sector leading to higher efficiency but will also make a paradigm shift in the sector.

The discussion on the matter is still at an early stage but the policy could be released along with the government’s larger privatisation policy that will allow the selling of some Indian public sector banks. Bank of India, Central Bank of India, Bank of Maharashtra, Punjab & Sind Bank are some of the state-run lenders that the government is looking to privatise.