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Tags Current Affairs

PSU banks and insurance firm to be privatised

Date: 03 February 2021 Tags: miscellaneous

Issue

The government has announced that two public sector banks and one general insurance company will be privatised and LIC will be listed on the stock market.

 

Background

It is a part of the consolidation in the banking and insurance sectors. Government has also announced Rs 20,000 crore recapitalisation of PSU banks.

 

Details

  • 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 percent or sell the entire stake to private ownership. 

  • 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.

  • 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.

  • 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.

 

Significance

  • 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. 

  • 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.

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