The Indian government is all set to clear the bad loan books of the selected public sector banks yet again. In its budget presented for the financial year 2020-21, the Indian authorities had included privatization of two public sector banks, a state-run common insurance company and Life Insurance Corporation(LIC).
The Indian authorities have reported to have been considering hiving off the non-performing loans of the 2 public sector banks, which it is yet to select. But it is to be noted that the banks to be chosen for privatization will be the banks that are not the part of the recent consolidation. Thus the selection will exclude Punjab National Bank, Bank of Baroda, Canara Bank and State Bank of India.
This decision has been taken keeping in mind not to complicate functioning and transition of the banks being consolidated as they already manage integration points. It is to be considered that consolidation exercise is carried out at various levels including ATMs ,branches, people, business, software.
The authorities had introduced the merger of 10 public sector banks into 4 large ones in August 2019, bringing down the variety of public sector banks within the nation to 12 from 27.
The privatization plan of action includes switching a few of their staff to different state-run lenders in a bid to make them engaging for consumers.
A senior authority official mentioned that “We could clean up the balance sheet and then offer the bank for sale, if it would get better valuations… All options are open,” .
The finance ministry will engage in discussions with the Niti Aayog over the subsequent 10 days to determine the candidates for privatization.
In an unusual move in November, an RBI working group had suggested that giant company homes and corporations must be allowed to take over banks by amending the Banking Regulation Act.
This move or rather the suggestion was strongly rebuked by eminent scholars and economists namely Mr. Raghuram Rajan who pointed out to the inefficiency and baselessness of the scheme by emphasizing on the aspect that if banks were to be owned by its consumers, the whole purpose of modification and curbing losses is bound to be defeated.
As it is widely known that with privatization, worker interests are usually compromised as in a monetized world, workers are not expected to enjoy an upper hand.
But the finance minister Nirmala Sitharaman has assured to protect the interests of the workers by stating, “We obviously have to negotiate with those bidders to see that the workers’ interests are safeguarded, not just for today but also if the commitment is to ensure that their pensions will be paid, it will be definitely something which I will have to keep in mind… We will have to talk with everybody,” she had mentioned.