A recent RBI Bulletin stated that Government Banks Privatization May Do More Harm Than Good. The latest Reserve Bank of India (RBI) bulletin published on August 18 suggests that a big bang approach to privatization of government-owned banks may do more harm than good. Some of the major reasons as identified by the RBI paper that show PSBs can serve the country better than private banks include better financial inclusion, better credit system, and better efficiency of the PSBs.
The paper highlighted that the private banks have failed to cater to the customers of the rural and semi-urban areas to date and customers from such locations are relying heavily on PSBs for banking. The paper also suggests that market confidence tends to be in favor of PSBs in terms of crisis. While private sector banks (PVBs) are more efficient in profit maximization, their public sector counterparts have done better in promoting financial inclusion, they said in the article. The CNBC flashes the analysis on Government Bank and Private bank comparison on various parameters.
The gradual approach to privatisation adopted by the government could ensure that a void was not created in fulfilling the social objective of financial inclusion and monetary transmission, they said. Quoting various studies, the authors said, PSBs (Public Sector Banks) had played a key role in catalyzing financial investments in low-carbon industries, thereby promoting green transition in countries such as Brazil, China, Germany, Japan, and in the European Union.
Against the backdrop of these findings, a big bang approach of privatisation of these banks may do more harm than good. The government has already announced its intention to privatize two banks. The central bank said the views expressed in the article were of the authors and do not represent that of Reserve Bank of India (RBI). Also Read – Married son Can get Compassionate Appointment in Banks
