Shares of state-owned lenders were trading higher in Tuesday's early trade following reports government is currently formulating a new privatisation proposal of selling the unmerged banks to private players or divest stakes.
Several media reports said as part of an overhaul of the banking industry, government is aiming to reduce PSBs to four to five, by selling stake in order to help raise money by selling assets in non-core companies and sectors during Covid-19 outbreak.
A government official said that the first part of the plan would be to sell majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank, leading to effective privatisation of these state-owned lenders.
The Nifty PSU Bank index jumped over 2% led by gains in State Bank of India, Union Bank of India, Bank of Baroda and Indian Bank. The BSE PSU index was trading 2.62% higher at 5,104, with 44 stocks rising and 33 stocks falling in today's session.
Shares of Indian Overseas Bank (IOB) with pending buy orders of 1,989,185 shares, Punjab & Sind Bank with pending buy orders of 237,105 shares and no sellers, were locked at the upper circuit on NSE. Meanwhile, Bank of Maharashtra shares were the most active stocks on NSE in terms of volumes, with 70,79,442 shares being traded on BSE and NSE counters.
Bank of Maharashtra share price rose 14%, followed by 12% rise in Central Bank, 10% in UCO Bank. Bank of India and Indian Overseas Bank shares gained in the range of 7% to 5%.
"The government has already said that there will be no more mergers (between state-owned banks) so the only option for them is to divest stakes," reports quoted a government official as saying. Several government committees and the Reserve Bank of India have recommended that the nation should have not more than five state-owned banks, which presently has 12 state-owned banks.
According to the sources, the divestment plan may not happen in this financial year due to unfavourable market conditions. However, it would be put before the Cabinet for approval.
Earlier in 2019, the government created a handful of larger banks by merging ten state-owned banks into four. "Now we are thinking of selling the unmerged banks to private players," government sources said.
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