RBI clarifies on PSB privatisation reports, says bulletin article not its view

The Reserve Bank of India (RBI) on August 19 clarified that a staff-authored article that appeared in the monthly bulletin arguing against a big bang approach to state-run bank privatisation does not represent the central bank's view.

“As clearly stated in the article itself, the views expressed in the article are those of the authors and do not represent the views of the Reserve Bank of India,” the central bank said in a clarification. The clarification was issued after certain sections of the media stated that the RBI is against privatisation of Public Sector Banks (PSBs), it added.

The article titled “Privatisation of Public Sector Banks: An Alternate Perspective” was published in the August 2022 issue of the RBI Bulletin. The article is prepared by Snehal Herwadkar, Sonali Goel, and Rishuka Bansal of the banking research division, Department of Economic and Policy Research researchers of the RBI.

The article suggested that a big bang approach to privatisation of government-owned banks may do more harm than good. The article analysed various pros and cons of privatisation and identified how an emerging economy like India may face more challenges due to the privatisation of banks. The article suggested that market confidence tends to be in favour of state-run banks in terms of crisis.

Some of the major reasons identified in the article showed that state-run banks can serve the country better than private banks include better financial inclusion, a better credit system, and better efficiency of these banks. 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 state-run banks for banking, it said.