Bank Privatization: RBI said that privatization of public sector banks will do more harm than good!

Public Sector Bank Privatisation: On one hand, the government is aiming to privatize two public sector banks in the current financial year 2022-23. And there are plans to privatize more banks in the coming days. But the question has been raised in the article written in RBI on the government’s decision to privatize state-run banks. RBI has written in its article that large-scale privatization of public sector banks may cause more harm than benefit.

The Reserve Bank of India (RBI) has cautioned in an article advising the government to proceed carefully in this matter. An article published in the RBI Bulletin said that private sector banks have been successful in making more profits, they are also efficient in this while public sector banks have done better in promoting financial inclusion. The article said, “Privatization is not a new concept and its advantages and disadvantages are known to all. Privatization has traditionally been the key solution to all problems, while economic thinking has found that it requires a cautious approach to pursue it.

Let us tell you that last month, the Central Government has been suggested to privatize all public sector banks except State Bank of India. This suggestion has been given to the government by former Vice Chairman of NITI Aayog Arvind Panagariya and Poonam Gupta of ACAER who have prepared a report in this regard. The report said that the market share of private banks has increased and they have emerged as a better option than public sector banks.

The report said that in the last decade, except SBI, all other public sector banks have lagged far behind private banks in every aspect. The operation cost of public sector banks has increased, so the loans given by them have been sinking. According to the report, these public sector banks have earned lower returns on assets and equity than private banks. Government banks are far behind private banks in terms of making deposits and loan advances.

Employees unions of public sector banks are also opposing the privatization of public sector banks.

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