Privatization is the paperweight to the currently weightless budget. But in a country where the average citizen “is most comfortable banking with PSU banks,” privatizing banks involves many complexities. Focusing on the Rs 1.75 lakh crore disinvestment target for the financial year 2022’s privatization drive, the finance ministry is holding discussions to bring legislative amendments in order to bring two public sector banks (PSBs) out of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and (nationalization) 1980. With the merger of 10 public sector banks into four in 2020, there are now 12 public sector banks (PSBs) in India.
What will happen under PSE policy?
The center will keep bare minimum interference in the strategic sectors. The NITI Aayog has been entrusted with the task of identifying the public sector units (PSUs) in strategic sectors which can be merged, privatized, or made subsidiaries of other PSUs. It has secluded four banks namely Bank of Maharashtra (BoM), Bank of India (BoI), Indian Overseas Bank (IOS), and the Central Bank of India (CBI) to privatize.
Challenges in privatization
The 2008 crisis revealed, a “nationalized loss”. With the financial linkages, banks have with other parts of the economy, banking losses have had proved large social consequences. In the aftermath of the 2008 financial crisis, a number of privately-owned banks in the West had to be bailed out by governments, using taxpayer money.
All India Backward Classes Federation believes this move by the government will potentiate social injustice and denial of the reservation to BCs and other sections.
TPT Policy Advocacy and Recommendations
- Privatization of banks is miasmal from the depositor’s point of view. Keeping in mind the downfall of the US Economy in the 2008 global financial crisis, the administration should be alert of the crisis that would arise if the banks were authorized to investors and private players. With private corruption now being entangled in the system, privatization will handicap the citizens.
- Has the government adapted to the quality of privatizing sectors to help them raise funds and reduce their financial burden and avoid having to recapitalize them Instead of privatizing banks, the government should stand up to international financial institutions. Taking the banks away from the oversight of the politicians and handing it over to corrupted corporates doesn’t seem to be a smart move.