Government's think tank NITI Aayog has kept six Public Sector Banks (PSBs) including State Bank of India (SBI), out of the privatization plan. The Banks that were kept out of the privatization are the ones that were the part of the last round of bank merger/ consolidation.
This proposal has been given by Department of Investment and Public Asset Management (DIPAM) to the group of ministries.
Public Sector Banks That Will Not Be Privatized
The Banks that were part of the last round of consolidation and will not be privatized are as follows:
- State Bank India (SBI)
- Punjab National Bank (PNB)
- Union Bank
- Indian Bank
- Canara Bank
- Bank of Baroda
Why Six PSBs Are Excluded?
NITI Aayog’s recommendation to exclude six Public Sector Banks (PSBs) is in line with the finance ministry decision that is keen on expeditious integration of systems at these banks. These PSBs are important and cover a vast proportion of the financial system in India.
Why this news?
This news has come to existence due to the National Bank Strike. United Forum of Bank Union (UFBU), an umbrella body of nine bank unions, has called for a 2-day nationwide strike on March 15 and 16 to protest against the government's plan to privatize two state-owned banks and retrograde banking reforms. Over 10 lakh PSU bank employees and officers are participating in the bank strike.
Government will soon take a call on the two banks and one general insurer that will be taken up for privatization in the next fiscal year.
Last round of Bank Merger
2019 bank consolidation included:
- Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank
- Allahabad Bank merged with Indian Bank.
- Syndicate Bank was merged with Canara Bank.
- Andhra Bank and Corporation Bank with Union Bank of India.
Mergers came into effect in the ongoing fiscal year but banks are still to complete the process of integration.
- Indian Overseas Bank, Central Bank of India and UCO Bank are under the prompt corrective action framework of the Reserve Bank of India. They are expected to come out of it after the RBI reviews its decision following the announcement of fourth-quarter results of these banks.
- IDBI Bank has already come out of the framework.
- Privatization means a transfer of ownership, management, and control of public sector enterprises to the private sector.
- Banking is one of the strategic sectors under the new framework put up by the government.
- Under bank privatization policy, government would have a limited number of state-owned entities in strategic sectors.
- The final number of entities in each sector including banking will be determined by a group of ministers.
- Ways of Privatization:
- Two core methods: Transfer of Ownership and Disinvestment
- Public auction
- Public tender
- Direct negotiations
- Transfer of control of State or municipally controlled enterprises
- Lease with a right to purchase
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