Indian Overseas Bank, Central Bank of India clarify on privatisation reports

Indian Overseas Bank, Central Bank of India clarify on privatisation reports

Shares of both state-owned banks rallied up to 20 per cent on the BSE

RBI has removed PCA restrictions on IOB RBI has removed PCA restrictions on IOB

Amid privatisation buzz, Indian Overseas Bank (IOB) and Central Bank of India (CBI) on Wednesday informed the exchanges that no information had been conveyed on those lines to both public sector banks. 

"As regards the captioned media news, we do not have any information on privatization of the Bank as on date. There is no such negotiation/event taking place at the Bank," Central Bank of India said in a regulatory filing. Moreover, IOB also issued a clarification stating, "...We inform that we have not received any communication regarding privatization of Bank from DFS / Government of India and we are unaware of the reasons for the sudden movement in stock price. It may be due to speculation."

Shares of two state-owned banks, IOB and CBI, rallied up to 20 per cent on the BSE in Wednesday’s intra-day trade on back of heavy volumes amid reports that the two financial institutions might be privatised. The Centre has shortlisted CBI and IOB for divestment, according to a report by a TV channel.

Also read: Govt to table bill to amend banking law in winter session; privatise 2 public sector banks

IOB has surged 20 per cent to Rs 23.80, while CBI gained 15 per cent on the BSE in intra-day trade today. In comparison, the S&P BSE Sensex was up 0.2 per cent at 58,810 at 09:19 am.

Centre, in its Union Budget for FY22, had announced broader divestment goals for the current fiscal. In that, it included privatisation of several other non-financial state-owned entities and listing of the wholly owned Life Insurance Corporation of India.

In September, Reserve Bank of India (RBI) had removed Prompt Corrective Action (PCA) restrictions on both IOB and CBI banks.

Furthermore, the government is going to introduce the Banking Laws (Amendment) Bill 2021 in the upcoming Winter Session of Parliament to enable the privatisation of two public sector banks (PSBs) as part of its Rs 1.75 lakh crore disinvestment target in the current fiscal year. 

The legislation is among the 26 bills that are scheduled to be introduced during the session. 

The bill seeks "to effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of the Union Budget announcement 2021 regarding privatisation of two Public Sector Banks."