Mumbai: Finally, the Centre has pressed the P (privatisation) button in the annual budget for 2021-22 which was presented by Finance Minister Nirmala Sitharaman by using “Made in India’’ tablet to deliver the paperless budget. She has announced that two public sector banks and one general insurance company will be privatised and LIC will be listed on the bourses in the financial year 2021-22 as part of the consolidation in the banking and insurance sectors.
LIC had a balance sheet of Rs 32.8 lakh crore as of Q1FY21. The government is likely to mobilise a sizable amount from the LIC IPO, making the life insurer one of the largest firms in market capitalisation. LIC has already launched the preparations for the IPO.
The government currently holds a majority stake in PSU banks. The government is expected to bring down the stake in the two PSU banks below 51 per cent or sell the entire stake to private ownership. However, Sitharaman has not mentioned the names of two banks being considered for the privatisation. She has also announced Rs 20,000 crore recapitalisation of PSU banks.
She also announced that the government will complete the divestments of Air India by 2022. The government budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including 2 PSU banks and one insurance company, in the next fiscal year. Insurance sector opened for the private sector with an increase in FDI to 74% from 49%.
CII President Uday Kotak said these bold moves are expected to buttress the growth recovery process apart from making the financial sector future ready. On the other hand, FICCI President Uday Shankar said given the need to garner more funds to meet the social and economic needs of the country the government has shown commitment to augment resources through bold and strategic measures.