All private banks are now allowed to participate in government businesses, Finance Minister Nirmala Sitharaman announced on February 24. The business operations linked to the government were so far the forte of public sector lenders.
"Embargo lifted on grant of government business to private banks. All banks can now participate," the office of Sitharaman said in a statement issued on social media.
"Private banks can now be equal partners in development of the Indian economy, furthering government's social sector initiatives, and enhancing customer convenience," it further added.
A press release issued by the Department of Finance Services (DFS) said the private sector banks can be involved in "conduct of government-related banking transactions such as taxes and other revenue payment facilities".
“This step is expected to further enhance customer convenience, spur competition, and higher efficiency in the standards of customer services,” it added.Also read: Privatisation buzz fuelling rally in PSU bank and energy space, says Rajeev Srivastava of Reliance Securities
Govt agency biz for Pvt banks now open! Embargo removed. Tax payment & receiving pension made easy. Enhancing Cust. convenience #EoDB & Cust Service. Pvt Banks to be equal partners in Govt.’s Economic & Social agenda. @RBI to authorize Pvt banks #AatmaNirbharBharat @PMOIndia https://t.co/wzOKGEb7rr pic.twitter.com/NK2nzSqjGN
— DFS (@DFS_India) February 24, 2021
With the lifting of the embargo, there is no bar on RBI for the authorisation of private sector banks (in addition to public sector banks) for government business, "including agency business", the DFS further added.
Industry players positively responded to the government's decision on lifting the curb on private lenders.
"I welcome this progressive reform. It will enable the banking sector to serve customers better. Private and public sector must both work towards sustainable development of India," Uday Kotak, Managing Director of Kotak Mahindra Bank, said.