Budget 2024: Privatisation of two public sector banks still on Modi 3.0 government agenda

The Centre has stayed the announcement of privatisation of two public sector banks, sources told Business Today TV on Wednesday. Until the end of May, it was reported that the Centre was not keen to merge public sector banks (PSBs) in FY25. Sources added disinvestment pipeline is to be determined by the “situation of the market”. 

Earlier in the day, Finance Secretary TV Somanathan said that the government will not pre-announce the timing of its divestment plans for FY25 to ensure its best value for public companies. The Union Budget, for the second consecutive year, did not mention the term 'disinvestment'. This indicates the Modi 3.0 Government's continued emphasis on increasing the worth of Central Public Sector Enterprises (CPSEs) instead of divesting a portion of their equity holdings. 

In an interview with ET NOW, Somanathan said: "If I were trying to do something, I would not want to tell you in advance because I would want to get the best value that I can get," Somanathan explained regarding the strategic approach to divestment.

Finance minister Nirmala Sitharaman established the target for 2024-25 at Rs 50,000 crore. Nonetheless, in the Interim Budget presented in February, the disinvestment estimate for 2023-24 was adjusted down to Rs 30,000 crore

The Interim Budget for FY2025 included a standard category known as 'Miscellaneous Capital Receipts' under capital receipts. Notably, the term 'disinvestment' was absent from this interim budget. The provided explanation stated, “These include receipts on account of management of equity investments and public assets through various mechanisms.” It is worth mentioning that the full budget now incorporates the same information regarding 'disinvestment'.

The government aims to collect Rs 50,000 crore from disinvestment and asset monetization in the current fiscal year, according to DIPAM Secretary Tuhin Kanta Pandey.

“Our focus is on value creation,” Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management (DIPAM) at the press conference by Finance Minister Nirmala Sitharaman and Secretaries, following the Union Budget presentation on Tuesday. 

The Budget has mentioned Rs 50,000 crore under ‘Miscellaneous Capital Receipts’. “This combines with all kinds of receipts, disinvestment receipts, asset monetisation receipts and other kinds,” he said.

In its pre-Budget report, SBI Research highlighted the potential for the government to establish a clear stance regarding the disinvestment of public sector banks (PSBs). The report emphasized the necessity of developing a concrete roadmap to enhance capital attraction and to bolster confidence within financial institutions.

Additionally, a recent report from CareEdge Ratings underscored a noteworthy disinvestment capacity amounting to approximately Rs 11.5 trillion, based on the current market capitalization. This calculation considers a situation in which the government retains a minimum of 51 percent stake in the public enterprises.