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Government feels it's not the right time to privatise PSU banks

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After recapitalisation of PSBs, the government currently holds 91 percent to 97 percent stake in PSBs under PCA

The government does not think this is the right time to privatise the public sector banks but it is considering various options to bring down the government's holdings in PSBs to 51 percent, sources told CNBC-TV18.

Valuations of the PSBs, role of bank unions and changes in Bank Nationalisation Act are among the various hurdles the government is facing on the road to privatisation, said sources. Further, the government also thinks financials of the PSBs don't support the move, they added.

After recapitalisation of PSBs, the government currently holds 91 percent to 97 percent stake in PSBs, which are under the Reserve Bank of India's Prompt Corrective Action framework. Meanwhile, the government owns 87 percent to 92 percent stake in small banks and banks that have exited PCA. As per the public float norms by Securities and Exchange Board of India (SEBI), banks are required to float 25 percent in public.

The sources confirmed that the government will continue to provide recapitalisation funds to PSBs, as per their need and merit.

In January, secretary of financial services Rajiv Kumar told PTI that the finance ministry asked the public sector banks to gradually bring down or dilute the government’s equity to 52 percent.

The government is planning to present a two-pronged strategy in the upcoming Union Budget to push divestment and asset monetisation in the public sector enterprises, CNBC-TV18 reported on June 21, citing sources.

Sources had said that Niti Aayog has chalked out a plan to reduce stake and monetise the assets of PSUs, however, there are some differences between the finance ministry and Niti Aayog.

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