Indian Overseas Bank, which has a market capitalisation of about Rs 40,000 crore and Central Bank, which has a market capitalisation of about Rs 20,000 crore are being considered for privatisation.
Both the banks are publicly listed i.e. they are traded on NSE (National Stock Exchange) and BSE (Bombay Stock Exchange).
Privatisation in this context means that the governments will sell their stake in these companies.
The Government of India owns about 96% of the company Indian Overseas Bank and about 90% of the company Central Bank. The former is worth about Rs 39,000 crore and the latter is worth about Rs 18,500 crore.
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Indian government’s think tank NITI Aayog recommended these two companies in the privatisation drive. Now, these are being evaluated by the disinvestment and financial services departments. Finally, the Union Cabinet will evaluate and decide. Not to forget, the approval of the Reserve Bank of India will be required too.
An exercise like this is a multi-stage process and thus due process will be followed.
It must be noted that to bring this recommendation to fruition will require certain changes in the legislation to enable the state-run banks to become privatised. This too will have a bearing on the timeline of privatisation if it comes to fore.
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With disinvestment, the government aims to raise cash as well as improve the functioning of the companies by bringing in private ownership.