India is looking to privatise more than half of its PSU banks to reduce the number of PSU banks lenders to just five as part of an overhaul of the banking industry. The first part of the plan would be to sell majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank, leading to effective privatisation of these state-owned lenders, a government official said.

The idea is to have 4-5 government-owned banks,” said one senior government official. At present, India has 12 state-owned banks.

The government official said that such a plan would be laid out in a new privatisation proposal the government is currently formulating, and this would be put before the cabinet for approval.

The government is working on a privatisation plan to help to raise money by selling assets in non-core companies and sectors when the country is strapped for funds due to lack of economic growth caused by the coronavirus pandemic.

The government has already said that there will be no more mergers (between state-owned banks) so the only option for them is to divest stakes,” a senior official at a state-owned bank said.

Last year, the government had merged ten state-owned banks into four, creating a handful of larger banks in the process.

Now we are thinking of selling the unmerged banks to private players,” the government official said.

The divestment plans may not happen in this financial year due to unfavourable market conditions, the sources said.