This Article is From Feb 16, 2021

Select State-Run Lenders Rally On Report Of Potential Privatisation

Shares of Indian Overseas Bank, Bank of India, Central Bank of India and Bank of Maharashtra rallied as much as 20 per cent

Select State-Run Lenders Rally On Report Of Potential Privatisation

Government is considering mid-sized to small banks for its first round of privatisation.

Shares of Indian Overseas Bank, Bank of India, Central Bank of India and Bank of Maharashtra rallied as much as 20 per cent on report that the government has shortlisted four mid-sized state-run banks for privatisation. The four banks on the shortlist are Bank of Maharashtra, Bank of India, Indian Overseas Bank and the Central Bank of India, news agency Reuters reported citing sources.

Following this report, Indian Overseas Bank stock price rose by its daily maximum limit of 20 per cent to hit an intraday high of Rs 13.20. Central Bank of India advanced 15.6 per cent to hit high of Rs 16.12, Bank of India climbed 15 per cent to hit fresh 52-week high of Rs 67.70 and Bank of Maharshtra rallied 20 per cent to hit a high of Rs 19.10.

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 told Reuters.

Two of those banks will be selected for sale in the 2021/2022 financial year which begins in April, the officials said.

The government, however, will continue to hold a majority stake in India's largest lender State Bank of India, which is seen as a 'strategic bank' for implementing initiatives such as expanding rural credit.

India's deepest economic contraction on record caused by the pandemic is driving the push for bolder reforms, economists say.

Government also wants to overhaul a banking sector reeling under a heavy load of non-performing assets, which are likely to rise further once banks are allowed to categorise loans that soured during the pandemic as bad.