Renewed challenges for the Indian banking sector may derail India’s plan to privatise two state-owned banks in the current financial year, Fitch Ratings said.
FM Nirmala Sitharaman in her budget speech for FY22 had announced that the government will privatise two public sector banks and one insurer. The Niti Aayog has already sent a shortlist of PSBs to the group of ministers (GoM).
The key contenders for privatisation include Bank of Maharashtra,
and Bank of India.
Indian Overseas Bank,
are currently under the RBI’s prompt corrective action (PCA) framework that puts some restrictions on them, including on lending, management compensation and directors’ fees. The government infused Rs 11,500 crore in these three lenders on March 31. The ratings agency also said in its note that investor interest might be especially muted for banks, which are currently restricted from pursuing loan growth to higher-yielding borrowers and branch expansion under the Reserve Bank of India’s prompt corrective framework.