Earlier this month during the presentation of the Budget for the year 2021-22 Nirmala Sitharaman, the Finance Minister announced the privatization of public sector banks. According to the reports Rs.1.75 crores has been budgeted by the government from stake sale of public sector companies and financial institutions, along with two public sector banks and one insurance company as a part of disinvestment drive.
It is said that Bank of Maharashtra, Bank of India, Indian Overseas Bank and Central Bank of India, the government had shortlisted four banks for privatization. Out of which around two banks will be selected for the sale. The government is trying to experiment on small and mid-sized banks for the first round of privatization.
But the government has a plan to continue holding a majority stake in State Bank of India which is considered as a strategic bank being India’s largest lender.
Though the government wants to sell only four banks initially in 2021- 2022 financial year which begins from 1st of April. There is threat of resistance from unions representing the employees as this can create employment challenges. Other than this even political pressure may impact government’s decision.
However according to a government source, it will take nearly five to six months to begin with the actual privatisation process.
India has witnessed the deepest economic contraction due to the Covid-19 pandemic and the idea of privatisation of banks might not hold good for time being.
The former chief statistician, Pronab Sen also mentioned on Wednesday that “Privatisation (of CPSEs) is best done when the economy is booming but, privatisation in a recession is a horrible idea”.
Even the economist’s suggest for the sale bigger banks rather than the mid-sized and small banks as it can probably fetch more resources for the budget spending when compared with the sale of small banks.
Therefore, now the government has to make apropriate decision that leads to the growth and betterment of India.