The government has shortlisted four mid-sized, State-run banks for privatisation under a new push to sell State assets and shore up government revenues, according to agencies. Privatisation of the banking sector, which is dominated by State-run behemoths with hundreds of thousands of employees, is politically risky because it could put jobs at risk. But Prime Minister Narendra Modi’s administration aims to make a start with second-tier banks. 

The four banks on the shortlist are Bank of Maharashtra (BoM), Bank of India (BoI), Indian Overseas Bank (IOB) and Central Bank of India, according to agencies quoting two government officials on condition of anonymity as the matter is not yet public. Two of these banks will be selected for sale in 2021-22, which begins on April 1. A finance ministry spokesman has declined to comment on the matter. 

The government is considering mid-sized to small banks for its first round of privatisation to test the waters. In the coming years, it could also look at some of the country’s bigger banks, the officials have said. The government, however, will continue to hold a majority stake in the country’s largest lender, State Bank of India, which is seen as a strategic bank for implementing initiatives, such as expanding rural credit. 

The country’s deepest economic contraction on record caused by the pandemic is driving the push for bolder reforms, economists say. New Delhi also wants to overhaul a banking sector reeling under a heavy load of non-performing assets (NPAs), which are likely to rise further once banks are allowed to categorise loans that soured during the pandemic as bad.