Govt to introduce bills for facilitating privatisation of public sector banks; changes to PRFDA Act

The government may introduce two major financial sector bills, including the planned law to facilitate public sector bank privatisation. This was also mentioned by the finance minister in the budget. The government is also expected to propose changes to the Pension Fund Regulatory and Development Authority (PFRDA) Act, 2013, to allow the National Pension System Trust (NPS) to be separated from the PFRDA in order to ensure universal pension coverage.

Reportedly, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, would be required for the privatisation of banks.

These Acts resulted in the nationalisation of banks in two phases, and aspects of these laws must be altered in order for banks to be privatised.

Parliament will convene for a month-long winter session before the end of the month. The second batch of Supplementary Demands for Grants, which would allow the government to spend money not included in the Finance Bill, would also be presented for approval.

While presenting the Budget for 2021-22, Finance Minister Nirmala Sitharaman announced the privatisation of public sector banks (PSBs) as part of a disinvestment plan to raise Rs 1.75 lakh crore.
“In addition to IDBI Bank, we intend to privatise two public sector banks and one general insurance firm in the year 2021-22,” she had stated.

The government has already secured permission from Parliament for the General Insurance Business (Nationalisation) Amendment Bill, 2021, in the monsoon session that ended in August 2021, to ensure the privatisation of a general insurance firm.

According to reports, the powers, functions, and obligations of the NPS Trust, which are now governed by the PFRDA (National Pension System Trust) Regulations 2015, may now be governed by a charitable trust or the Companies Act as a result of the revision to the PFRDA Act.

The goal is to keep NPS Trust separate from the pension regulator and administered by a 15-member competent board. The government, including states, is the largest contributor to the corpus, hence the bulk of members are likely to be from the government.