Banking Privatisation

Banking Privatisation

Context

The Centre had announced privatisation of two public sector banks in the Budget for 2021-22 but is yet to amend the relevant banking laws to enable the sale of its majority stake in them.

Concept:

Banking Laws (Amendment Bill 2021)

• It aims to bring down the minimum government holding in the PSBs from 51 per cent to 26 per cent.
• It will bring amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 

Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970:

It provides for the acquisition and transfer of the undertakings of certain banking companies, having regard to their size, resources, coverage and organization, in order to control the heights of the economy and to meet progressively, and serve better, the needs of development of the economy in conformity with national policy and objectives and for matter connected therewith or incidental thereto.

Banking Regulation Act, 1949

• It regulates banking firms in India.
• It was passed as the Banking Companies Act 1949. and was changed to the Banking Regulation Act,1949 from 1st March 1966.
• This act empowers the Reserve Bank of India (RBI) to:
  • Issue licence to commercial banks,
  • Regulate shareholders’ shareholding and voting rights,
  • Supervises the appointment of boards and management,
  • Regulates the operations of banks, giving instructions for audit,
  • Control moratorium, merger, and liquidation,
  • Issues instructions to the banks in the interests of public welfare & banking policy,
  • Impose a penalty on banks if required.