Privatisation of PSBs: Govt to bring Two Amendments

February 17, 2021

The government will bring about amendments in the two acts in order to facilitate the privatisation of public sector banks (PSBs).

Key Facts

Amendments will be made in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.
These two acts had facilitated for the nationalisation of banks in two phases.
Now, in order to privatise the PSU Banks, provisions of these acts have to be changed.

Background

The Finance Minister Nirmala Sitharaman had announced about the privatisation of PSBs, while presenting Union Budget 2021-22.
PSBs will be privatised as a disinvestment drive in order to generate Rs 1.75 lakh crore.
Three banks including the IDBI banks will be privatised as per the announcement.

Recent Merger of Banks

The government had also merged 10 public sector banks into four in the year 2020. Thus, the total number of PSBs came down to 12 from 27.
Under the plan, the United Bank of India and Oriental Bank of Commerce were merged with the Punjab National Bank (PNB). This made PNB the second largest PSB.
Further, the Syndicate Bank was merged with Canara Bank.
Allahabad Bank was merged under the Indian Bank.
Andhra Bank and Corporation Bank were merged with the Union Bank of India.
In 2019, the Vijaya Bank and Dena Bank were merged with the Bank of Baroda.
In April 2017, SBI had merged five of its associate banks namely, the State Bank of Patiala, State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Travancore and the Bharatiya Mahila Bank.

Banking Companies (Acquisition and transfer of undertakings) Act, 1970

This act deals with the merger of banks. It provides for the acquisition and transfer of undertakings of certain banks with respect to their size, coverage, resources, and organization so as to control heights of the economy.

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