There may be a big announcement regarding the disinvestment of PSU banks in the Budget, and this report of SBI will make the government happy.
PSU Bank divestment: The government should pursue disinvestment in public sector banks (PSBs) as they are in good condition. The Economic Research Department of the State Bank of India (SBI) said this in its report on Monday.
PSU Bank divestment: The government should pursue disinvestment in public sector banks (PSBs) as they are in good condition. The Economic Research Department of the State Bank of India (SBI) said this in its report on Monday. The report also emphasizes strengthening the existing government banks.
What is the update regarding IDBI Bank?
The report titled 'Preface to the Union Budget 2024-25' said that since the banks are in good condition, the government should go ahead with the disinvestment of public sector banks. Regarding the privatization of IDBI Bank, it said that the government and the Life Insurance Corporation of India (LIC) are selling about 61 percent stake in the bank.
According to the report, "They invited bids from buyers in October 2022. The Department of Investment and Public Asset Management (DIPAM) received several expressions of interest for IDBI Bank's stake on offer in January 2023. We hope the government will clarify this in the budget."
How much stake does the government have in IDBI Bank?
Currently, the government holds more than 45 per cent stake in IDBI Bank and (LIC) holds 49.24 per cent stake. The report also suggests that the government should change the tax on deposit interest and treat deposits of different maturity periods equally in line with mutual funds and stock markets. CASA may increase
It said, "Domestic net financial savings declined to 5.3 per cent of gross domestic product (GDP) in FY 2022-23 and is expected to be at 5.4 per cent in 2023-24. If we make the deposit rate attractive in line with mutual funds, it may lead to an increase in domestic financial savings and current account and savings account (CASA)."
The report said that since this amount will be in the hands of depositors, it may lead to additional spending and thus the government will get more Goods and Services Tax (GST) revenue.
There will be stability in domestic savings
It said, "An increase in bank deposits will not only bring stability to the core deposit base and the financial system but will also bring financial stability to domestic savings as the banking system is better regulated and there is more confidence in it than other options with higher risk/volatility."
SBI's economic research report expects the government to address concerns related to the Insolvency and Bankruptcy Code (IBC). It should be reformed and focus should be on expediting cases under IBC. Recovery through IBC stood at 32 per cent in FY 2023-24 and financial creditors lost 68 per cent of their claims. It says that it is taking 863 days instead of 330 days to reach a solution.
It says, "IBC is an important measure for the resolution of stressed assets. But for this, the scope of potential solution applicants needs to be broadened to move the market forward...."
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