Bank Privatization: The condition of government banks has improved, still the government is preparing to privatize many banks, know the details
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Bank Privatization: Preparations are being made once again by the Central Government for the privatization of public sector banks. Public sector banks have performed well in the last few years. Along with this, bad loans have also been controlled to a great extent. But still, the government has started making new preparations to hand over the banks to private hands. According to the report of Live Mint, the Finance Ministry is preparing the list of banks in collaboration with the Reserve Bank of India. It has been claimed in the report that a panel has been formed along with NITI Aayog to prepare the review list of the bank. In this, NITI Aayog has recommended to the Finance Ministry to hand over two government banks to private hands. This includes the names of banks Central Bank of India and Indian Overseas Bank. It is being told that Finance Minister Nirmala Sitharaman had discussed about Central Bank of India and Indian Overseas Bank in her budget speech for 2021-22. Along with this, he also announced privatization of IDBI Bank and a general insurance company. But, work on this plan was stalled for some time. But now, the plan is going to be implemented rapidly.
Finance Ministry did not respond
It has been told in the Mint report that questions were asked to the Finance Ministry spokesperson and the Financial Services Secretary regarding this. But he did not answer the question. In the June quarter, 12 PSUs (Public Sector Undertakings) Amid reports of considerable improvement in the performance of public sector banks over the last few quarters, with their overall net profits rising, the government is looking to re-evaluate the strengths and weaknesses of the banks before taking a decision on their privatisation. It increased to ₹34,418 crore from ₹15,307 crore last year. Moreover, state-run banks have recorded significant improvement in their asset quality, with gross non-performing assets declining from a peak of 14.6% in March 2018 to 5.53% in December 2022. PSU bank shares have also performed well in the stock markets. The government was first looking to privatize smaller banks with regional presence and those that came out of the RBI’s Prompt Corrective Action (PCA) scheme, under which the regulator places restrictions on lending, dividend payments and management compensation. With this, Central Bank, Indian Overseas Bank and UCO Bank would have come under PCA. But public sector banks are now making a smart recovery and strengthening their finances while curbing bad loans. It is now being realized that privatization should bring maximum profit to the exchequer while providing value to the acquirer and lending. This should help in further enhancing the scenario.
The process of privatization has not been decided yet
The dates for privatization will be decided only after the legislative process – including amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 – is finalized. It is now believed that this exercise would be best suited for the new government in 2024-25. After the amendments, the shortlisted names will be approved by the Group of Ministers before the Cabinet. Before the completion of the proposed privatization process, the government also merged public banks, merging weaker banks with stronger banks. A total of 10 public sector banks were merged from 1 April 2020. There are currently 12 public sector banks in India, up from 27 in 2017. The remaining government banks in India include State Bank of India, Punjab National Bank, Bank of Baroda, Canara Bank, Punjab and Sind Bank, Indian Bank, Union Bank of India, Bank of India, Bank of Maharashtra, Central Bank of India, Indian Overseas Bank. And UCO Bank is included.
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