A voluntary retirement scheme(VRS) may be issued by state-owned banks
According to reports, two state-owned banks targeted for privatisation by the government will likely launch an appealing voluntary retirement plan (VRS) to shed excess fat.
According to reports, two state-owned banks targeted for privatisation by the government will likely launch an appealing voluntary retirement plan (VRS) to shed excess fat. Finance Minister Nirmala Sitharaman said on February 1 that the government planned to privatise two public sector banks (PSBs) and one general insurance company.
Based on the current sources, appealing VRS will make them lean and ready for acquisition by private sector firms interested in entering the banking field. VRS is not a forced exit but rather a choice for people who want to retire early with a decent financial package, according to the sources, who added that it was done in the past before the merging of some of the PSBs.
The NITI Aayog, tasked with identifying viable candidates for privatisation, has made recommendations to a high-level group chaired by Cabinet Secretary Rajiv Gauba. The Core Group of Secretaries on Disinvestment may explore privatising the Central Bank of India, Indian Overseas Bank, Bank of Maharashtra, and Bank of India.
Economic Affairs Secretary, Revenue Secretary, Expenditure Secretary, Corporate Affairs Secretary, Secretary Legal Affairs, Secretary Department of Public Enterprises, Secretary Department of Investment and Public Asset Management (DIPAM), and Secretary Administrative Department are the other members of a high-level panel.
Meanwhile, the banking regulator, the RBI, has stated that it is in talks with the government over the privatisation of PSBs. The government has allocated Rs 1.75 lakh crore from stake sales in public sector enterprises and financial institutions during the current fiscal year. The sum is lower than the previous fiscal’s budgeted amount of Rs 2.10 lakh crore for CPSE disinvestment.
Aside from PSBs, the government intends to exit LIC-controlled IDBI Bank. Last month, the Union Cabinet accorded in-principle permission to IDBI Bank’s strategic disinvestment and transfer of management control. The national government and the LIC together own more than 94% of IDBI Bank. LIC, currently the promoter of IDBI Bank with management control, holds a 49.21% stake.
Meanwhile, under the United Forum of Bank Unions umbrella, bank unions protested the plan to privatise banks and went on a two-day strike in March. Furthermore, they use social media to express their opposition to privatisation, calling it a backward step by the administration.
The union’s General Secretary Sunil Kumar, the Federation of Bank of India Officers Associations recently sponsored a social media campaign opposing the proposed privatisation step, which received widespread support from all stakeholders. He further stated that public sector banks have always played a critical role in the success of various government programmes such as demonetisation, Jan-Dhan Yojana, Mudra Yojana, and PM SVANid.
PSBs have approved 95% of the total loans under the PM SVANidhi initiative, which aims to provide financial assistance to low-income people.