Central Bank of India and Indian Overseas Bank may become private, Government could sell stake

The Centre may sell its stake in the Central Bank of India and Indian Overseas Bank (IOB). This is a part of its banks privatisation drive announced by Finance Minister Nirmala Sitharaman in the Union Budget 2021 in February.

Aayog has recommended divestment of these two banks. As per the news source, another potential sale includes the Bank of India (BoI).

The NITI Aayog had shortlisted six entities, not on the original list for merger a few years back - these included Central Bank, IOB, Bank of India, Bank of Maharashtra, Punjab & Sind Bank and UCO Bank.

The first two were finalised for proposal out of belief that “better-off entities would attract greater interest”. Central Bank and IOB are together valued at nearly Rs 44,000 crore.

As per sources, the proposal of NITI Aayog is being “vetted” by the disinvestment and financial services departments of the Finance Ministry – in what is a “multi-stage process to finalise a list of entities to be taken up for privatisation.”

As per the process, before seeking approval from the Union Cabinet NITI Aayog recommends names and those are reviewed by the inter-ministerial group of officers and then by another group of ministers.

The proposal and legislative changes needed for privatisation of the banks will be examined by the Financial Services Department and the Department of Investment and Public Asset Management (DIPAM), as per sources from the latter.

They added that the timeline to complete the privatisation will depend on the legislative changes required. This will also have to be discussed with the Reserve Bank of India (RBI) as the central bank provides “special dispensation for state-run banks in several areas”.