“Four large public sector banks will continue to exist even in the future and will continue to play an important part in the Indian banking system,” Sanjeev Sanyal, Member of the Economic Advisory Council to the Prime Minister (EAC-PM), told Moneycontrol in an exclusive interview on October 11.
India currently has 12 public sector banks: Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Indian Bank, Indian Overseas Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of India, UCO Bank, and Union Bank of India.
Sanyal added that at a strategic level, he believes some parts of the Indian banking system will continue to be government-owned.
“Having said that, I would be in favour that over a period of time, the private segment of the banking system grows, so that a larger share of the banking system is in private hands,” said Sanyal.
Finance Minister Nirmala Sitharaman, while presenting Budget 2021-22, had announced the privatisation of Public Sector Banks (PSBs) as part of the disinvestment drive to garner Rs 1.75 lakh crore.
In 2019, the central government decided to merge six disparate and weak PSBs into four in one stroke.
Accordingly, Punjab National Bank (PNB) took over Oriental Bank of Commerce and United Bank of India; Allahabad Bank became part of Indian Bank; Canara Bank subsumed Syndicate Bank; and Andhra Bank and Corporation Bank merged with Union Bank of India. Earlier, SBI had merged five of its associate lenders with itself, while Vijaya Bank and Dena Bank were merged with Bank of Baroda.
“About the bank privatisation, they will go on as per schedule. There is no change,” Finance Minister Nirmala Sitharaman had said on May 29 in Mumbai.
No Privatisation till 2024 elections
In July 2023, a senior government official told Moneycontrol that the privatisation of public sector banks (PSB) would have to wait. “Nothing is going to happen before the 2024 general elections. We don’t have legislation yet for it—without that privatisation is not possible," said the official, requesting anonymity.
Amendments will be required to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, for privatisation, the official said, adding that these Acts, which formed the basis for nationalisation of banks in two phases, need to be changed for privatisation.
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