The government may amend laws to speed up banking sector reforms during the budget session.

The government is likely to amend the Banking Regulation Act, 1949 and other laws to fast-track banking sector reforms during the upcoming budget session.

Apart from this, sources said, amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 are needed for privatisation of public sector banks.

These laws led to nationalisation of banks in two stages and the provisions of these laws need to be amended to enable privatisation of banks, they said.

If approved by parliament, the amendments would help lower the government’s stake in state-owned banks to below 51%, streamline bank governance and increase investor protection, sources said.

The parliamentary session starting on 22 July will include the presentation of the budget on 23 July and will end with the adoption of the Finance Bill on 12 August.

It should be noted that the government had scheduled amendments to these bills for consideration during the 2021 winter session, but the bills could not be postponed.

“Introduction of amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and additional amendments to the Banking Regulation Act, 1949 in the context of the announcement of the Union Budget 2021 for privatisation of two public sector banks” as per the list of legislative matters for the winter session.

Finance Minister Nirmala Sitharaman, while presenting the Budget for 2021-22, announced privatisation of public sector banks.

“In addition to IDBI Bank, we propose to pursue privatisation of two public sector banks and one general insurance company during 2021-22,” she said.

In order to ensure privatisation of the general insurance company, the government has already obtained the approval of the General Insurance Nationalisation Amendment Bill, 2021 from the Parliament during the Monsoon Session concluded in August 2021.

In April 2020, the government merged 10 public parent entities to create four, bringing the total number of public parent entities to 12 from 27 in March 2017.

Under the merger plan, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank, making the proposed entity the second largest public sector bank.

Syndicate Bank was merged with Canara Bank and Allahabad Bank was absorbed into Indian Bank. Andhra Bank and Corporation Bank were merged with Union Bank of India.

In the first three-way merger, Bank of Baroda had merged Vijaya Bank and Dena Bank in 2019. SBI had merged five of its associate banks — State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad — as well as Bharatiya Mahila Bank since April 2017.