Government's Bank Privatisation Move May Face Hurdles Amid Covid: Report

Centre's decision to privatise public sector banks face risks from political opposition as well as structural challenges like balance sheet stress.

Global rating agency Fitch said on Monday that the Centre's decision to privatise public sector banks (PSBs), face risks from political opposition as well as structural challenges like heightened balance sheet stress due to the ongoing Coronavirus pandemic. In its commentary titled "India's Bank Privatisation Plans Could Face Hurdles Amid Covid" the agency said that the infection induced situation is likely to subdue the performance of the banking sector for at least two to three years. Lack of political support in favour of legislative changes to the Act, which are required in order to go through with the sale, could be a significant hurdle for the government, it has stated. Moreover, there could also be more resistance from the trade unions this time around, who will be against the safety-net withdrawal of state ownership. Success of the plan would also require sufficient interest from investors willing to acquire large stakes in state-owned banks and run them, the Fitch statement said.