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.
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.
The lifting on embargo on private banks for government business comes days after Sitharaman, in her Union Budget speech, stated that more public lenders would be privatised in the upcoming fiscal.
A Reuters report on February 15 claimed that the government has shortlisted four state-run banks - Bank of Maharashtra, Bank of India, Indian Overseas Bank and Central Bank of India for privatisation.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
