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OPINION

Indian bank privatization: Guess the bank, then find a buyer

Narendra Modi’s decision to privatize two state-owned banks is significant, but the shortlist suggests the ones on sale are going to be small in scale but big in non-performing loans.

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Ever since Indian prime minister Narendra Modi announced the privatization of two state-owned banks in his budget speech in February, the Indian banking community has been engaged in a diverting game: guess the banks.

India has 12 state-owned lenders, which stem from Indira Gandhi’s nationalization of 14 in 1969 and another six in 1980, and they are varied in size and health.

State Bank of India is the biggest and by almost any metric the most successful – and, Modi has said, is systemically important and not up for sale in this new initiative. The others are a mixed bag tending mainly towards weakness.

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India's prime minister Narendra Modi speaks with the media on the first day of the 2021 budget session

So, which should the two banks be? Big ones? Small ones? Bad ones? Slightly better ones?

A backdrop to the debate was the consolidation among many state-owned lenders that took place in 2020.

As