New Delhi, July 9
Asserting that banks are in good condition, SBI Research suggested that the central government should take a stance on the disinvestment of public sector banks (PSBs).
In a comprehensive report put out by SBI Research, ahead of the much-awaited full Budget for 2024-25 to be tabled on July 23 - the first Budget under Modi 3.0, it asserted that divestment needs a concrete roadmap for attracting capital and confidence in financial institutions (FIs).
Disinvestment or divestment typically refers to the sale by the government, partly or fully, of a government-owned enterprise.
SBI Research report, authored and led by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI, expects the government to clarify the possible stake sale by LIC and the Centre in IDBI Bank, during the upcoming Budget.
"Government and Life Insurance Corporation of India are selling an almost 61 per cent stake in IDBI Bank. They invited bids from buyers in October 2022. In January 2023, DIPAM received several expressions of interest for the IDBI Bank stake on offer," its report claimed.
Given the complete change sweeping the PSBs under successive reforms and policy support, the roadmap ahead could be to reduce ownership stake in PSU banks, greater HR autonomy, further investments in digital and IT infrastructure and aligning priority sector lending (PSL) framework with priorities.
Also, it suggested that the divestment targets need to be more realistic without hesitations or deliberations given the maturity of Indian banking system.
It added that there is a need to scale up collaboration with global peers.
In the interim budget tabled in February this year, the 2023-24 divestment estimate was revised downward to Rs 30,000 crore from the previously budgeted Rs 51,000 crore. Furthermore, the target for 2024-25 has been set at Rs 50,000 crore.
Separately, according to a recent CareEdge Ratings report, there is total divestment potential of approximately Rs 11.5 trillion at current market capitalization, assuming the government retains control over the company's governance by maintaining at least a 51 per cent stake in these public undertaking companies and divests any excess shares.
Of this Rs 11.5 trillion divestment potential, public sector enterprises could contribute around Rs 5 trillion, while public sector banks and insurance firms could potentially add another Rs 6.5 trillion, the rating agency's report asserted.
CareEdge believes that the government will maintain its target of divestment (as a miscellaneous capital receipt) at Rs 50,000 crore in the upcoming budget to be tabled on July 23, the same as that given in the interim Budget.