RBI On Bank Privatisation: RBI on the backfoot, clarified on the article published on privatization of public sector banks

Public Sector Bank Privatisation: RBI has come on the back foot with its article warning the government on privatization of public sector banks. RBI has presented its clarification regarding the article. RBI has said that some of the views expressed clearly in the article are the personal views of the author, not RBI.

RBI said that in the press release issued regarding the August 2022 bulletin, it has been said that the decision of privatization is also being taken slowly by the government to ensure that zero is not created in achieving the social objective of financial inclusion.

Referring to the article, RBI said that it clearly states that

The traditional view has been that privatization is the panacea for all ills. But now economic thinking has come a long way to accept that a more nuanced approach is required while pursuing it.

In recent times, the decision of merger of public sector banks has made the consolidation of the sector possible, so it has helped in making a strong bank. And they are ready for every competition.

With vigorous privatization of banks, there is a possibility of more harm than benefit. The government has already announced that it is going to privatize two public sector banks. Thus slow and slow progress in this direction will not create a vacuum in achieving the social objective of financial inclusion.

RBI said that the researchers also believe that it will have positive results if the government proceeds slowly instead of taking a big-ticket approach.

In fact, an article was published in the bulletin of RBI, questioning the government’s decision to privatize state-run banks and wrote that large-scale privatization of public sector banks may cause more harm than benefit. In this article, cautioning the government, it has been advised to move slowly in this direction. 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.

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.

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