Two PSU banks, one insurance firm to be privatised, LIC IPO this year

The government on Monday announced that two public sector banks and one general insurance company will be privatised and LIC will be listed on the bourses in the financial year 2021-22 as part of the consolidation in the banking and insurance sectors. It has also announced Rs 20,000 crore recapitalisation of PSU banks.

What privatisation of PSU banks means?

The government will start the process of privatisation for two public sector banks in the coming financial year, Finance Minister Finance Minister said in her budget speech. However, the Minister did not disclose the names of the banks. The government currently holds majority stake in PSU banks. The government is expected to bring down the stake in the two PSU banks below 51 per cent or sell the entire stake to private ownership. Bank unions are likely to oppose the government’s initiative to privatise PSU banks.

Which bank will qualify for privatisation?

Banking sources say that smaller and middle level banks are likely to be privatised by the government. It’s unlikely to change the structure of big banks like State Bank of India and PNB. “The privatisation of two public sector banks and the stake sale of LIC should help the government meet the disinvestment target and reduce the fiscal constraints,” said Raghvendra Nath, Managing Director, Ladderup Wealth Management.

Is IDBI Bank on the privatisation list?

IDBI Bank is unlikely to be in the list of the government. Life Insurance Corporation (LIC) currently holds majority stake in IDBI Bank. LIC is supposed to reduce the stake in IDBI over a period of time. LIC is unlikely to give up control over IDBI Bank in the near future.

Which general insurance company will be privatised?

The government has not disclosed the name of the public sector insurance firm that will be on the privatisation block. There are four PSU general insurance companies: New India Assurance, United India Insurance (UII), National Insurance Company (NIC) and Oriental Insurance Company (OIC). The government had earlier dropped its plan to merge UII, NIC and OIC and decided to recapitalise them. Besides, the government also owns reinsurer General Insurance Corporation (GIC Re).

What does LIC IPO mean for the government?

Finance Minister Nirmala Sitamaraman has said Life Insurance Corporation (LIC) will go for an initial public offering in 2021-22. This is likely to be a mega IPO going by the Rs 32 lakh crore assets under management of LIC. The government is expected to mop up a sizeable amount from the LIC IPO, making the life insurer one of the largest firms in market capitalisation. LIC has already started the spadework for the IPO.