The sale of the majority stake of the government in the banks will be a credit negative for that bank

Mumbai, Ta. 17 September 2020, Thursday

The government's move to disinvest a large portion of its stake in some public sector banks could be negative for the ratings of these banks. This is because some of these banks have a weak credit profile and rely heavily on government support.

Reports were published recently that the government intends to disinvest its majority stake in some public sector banks.

The sale of the government's majority stake in these banks could lead to a negative credit for those banks, according to a report by ratings agency ICRA. The credit ratings of these banks are supported by a majority of the government. The level of deposits in banks also remains stable due to government ownership.

Going forward, the credit profile of these banks will depend on who their new managers are. The level of deposit in banks also depends on who the owners of the bank are.

The government will have to amend the Banking Companies (Acquisition and Transfer of Undertakings) Act before selling a majority stake in public sector banks.