Shares of Indian Overseas Bank (IOB) and Central Bank of India rallied on Wednesday amid speculations that the government has taken a decision to privatise these lenders, as suggested by the Niti Aayog. Shares of IOB closed up 13.1% to Rs 22.45 on the BSE, while the scrip of Central Bank rose 10.5% to Rs 22.70. Shares surged by over 20% in intra-day trade before paring some gains.
Meanwhile, IOB and Central Bank on Wednesday clarified to the stock exchanges that they hadn’t received any information from the government on the privatisation move.
Speculations about privatisation gained momentum a day after the Centre’s legislative agenda suggested that the Banking Laws (Amendment) Bill 2021 for privatisation of two public-sector banks will be taken up during the winter session of Parliament.
In a regulatory filing, IOB said: “…we do not have any information on privatisation of the bank as on date. There is no such negotiation/event taking place at the bank.” Central Bank of India, too, said, “…we inform that we have not received any communication regarding privatization of bank from DFS/Government of India and we are unaware of the reasons for the sudden movement in stock price. It may be due to speculation”.
The Bill to be taken up by Parliament seeks to “effect amendments to Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatisation of two public sector banks”.
Fitch had in June said the plan to privatise two PSBs in FY22 could be delayed, as the “bold move” faced risk from political opposition and structural challenges, including heightened balance-sheet stress in the wake of the Covid-19 outbreak.
Government officials, however, have said the work is in full swing and the names of the eligible candidates would soon be formally declared.