The government is looking to privatize more than half of its state-owned banks to reduce the number of government-owned lenders to just five as part of an overhaul of the banking industry. The first part of the plan would be to sell majority stakes in Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab & Sind Bank leading to effective privatization of these state-owned lenders.

“The idea is to have 4-5 government-owned banks,” said one senior government official. At present, India has 12 state-owned banks. Such a plan would be laid out in a new privatization proposal the government is currently formulating, and this would be put before the cabinet for approval. However, India’s Finance Ministry declined to comment on the matter.

The government is working on a privatization plan to help to raise money by selling assets in non-core companies and sectors when the country is strapped for funds due to a lack of economic growth caused by the coronavirus pandemic. Several government committees and the Reserve Bank of India have recommended that India should have not more than five state-owned banks.

The government has already said that there will be no more mergers (between state-owned banks) so the only option for them is to divest stakes. Last year, the government had merged ten state-owned banks into four, creating a handful of larger banks in the process.