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Govt should sell all its stake in PSU banks, insurers, says Prem Watsa

Billionaire investor Prem Watsa has suggested that the Indian government completely exit the public sector banks it was privatising for them to attract investors.

Hyderabad-born Watsa is the founder and chairman of the $53-billion Toronto-based investment giant Fairfax Financial Holdings. He was responding to questions about the government’s plan for the privatisation of IDBI Bank and two other lenders and also one insurance company, during an exclusive interaction with ET.

“My recommendation is that they sell 100% of public sector banks and insurance companies that they are privatising. Foreign investors and foreign banks will be encouraged by this and they will come in and implement the innovation needed. So, why do you need the 10% or 20% that the government owns,” Watsa said.

The Union Cabinet had cleared a proposal to sell the government’s entire stake in IDBI Bank in July last year. However, the government’s disinvestment secretary, Tuhin Kanta Pandey, recently alluded to a change of thinking, suggesting the possibility of retaining a residual stake.

Watsa noted that India’s banking system was 70% run by PSU banks and said more private sector banks were needed because they would bring more services to customers.

“Look at HDFC Bank and ICICI Bank and so on. The private sector banks are fantastic, but you need more of that and you need more competition. You need the Canadian banks and the American banks, let them all come in and compete,” said Watsa.

When asked if Fairfax would bid for the public sector banks that are coming up for sale, Watsa said his company was “looking at all of those opportunities”.

Watsa likened the privatisation programme to a similar initiative launched in the UK in the 1980s.

“The privatisation programme reminds me of the days when Margaret Thatcher came in and privatised companies left, right, and centre. It was a huge positive for the UK and this will be a big positive for India. I really do think this has raised Mr Modi’s programme and his vision to a higher level,” he said.

However, he pointed out that the government needed to move faster to implement the programme.

“The privatisation, I think they have to get it done. They announced it and said they will get it done in six months. Do not postpone it. Whatever the timeline is, stick to it. I was encouraged with how they did Air India,” Watsa said.

Fairfax owns stakes in a dozen companies in India across sectors such as banking, shipping, manufacturing, insurance, travel and business services. Its major investments include stakes in Bangalore International Airport, Chennai-based chemicals major Sanmar Group, Catholic Syrian Bank, Thomas Cook, Quess Corp and Digit Insurance. Digit Insurance was the first unicorn of 2021 by topping the $1 billion-valuation-mark. The investment giant has deployed $5 billion in India and Watsa had told ET in a September 2019 interview that he intended to double that amount.

Watsa believes that funds raised from privatisation could help finance large-scale social projects. He noted that the outlay for the Jal Jeevan Mission, which intends to take tap water to 900 million people, itself was $50 billion.

“All of these things they are privatising, you know – like power transmission, power generation, airports, roads, ports, railway stations, some of the banks – all will be a huge positive because they will be run well and once sold the government will get money for their social programmes,” he said.

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