INSUBCONTINENT EXCLUSIVE:
Lack of political support could hamper Government's bank privatisation planGlobal rating agency Fitch said on Monday that the Centre's
decision to privatise public sector banks (PSBs), face risks from political opposition as well as structural challenges like heightened
balance sheet stress due to the ongoing Coronavirus pandemic.In its commentary titled "India's Bank Privatisation Plans Could Face Hurdles
Amid Covid" the agency said that the infection induced situation is likely to subdue the performance of the banking sector for at least two
to three years.Lack of political support in favour of legislative changes to the Act, which are required in order to go through with the
sale, could be a significant hurdle for the government, it has stated.Moreover, there could also be more resistance from the trade unions
this time around, who will be against the safety-net withdrawal of state ownership
Success of the plan would also require sufficient interest from investors willing to acquire large stakes in state-owned banks and run them,
the Fitch statement said.The privatisation plan was announced in the Union budget for 2021-22 as is part of the government's broader
divestment goals for FY22
reduce the number of state-owned banks further
The number of PSBs came down from 27 in 2017 to 12 in 2020 after three successive rounds of consolidation, it added.State banks in general
have long been plagued with muted investor appetite due to structurally weak governance frameworks which have resulted in persistently weak
performance, reflected in significant asset-quality problems, it added.Fitch said the Covid-19 pandemic has further dampened business and
It is the impact on reported impaired loans will manifest potentially over an extended timeframe, considering the various forbearance and
relief measures by the authorities.
