DMPQ- Critically evaluate the govt’s plan to privatize the public sector banking.

It has been reported that while addressing the NCAER-organised India Policy Forum 2021, the Finance Secretary, TV Somanathan, said that the government continues to work on its stated position that most of the public sector banks will be eventually privatised.

In fact, he was responding to a suggestion by Montek Singh Ahluwalia that the government must now focus on getting the banking sector reforms done. Ahluwalia was a key member of the erstwhile Congress-led UPA government. He said that the difficult part of putting the public sector banking system competitively on a par with the private sector banking system was not done as yet.

The 1,926 town cooperative banks in 2004 have shrunk to 1,551 in 2018, as per an RBI report. Banks owned by sovereign government provides tremendous comfort level to depositors. In his subconscious mind the common man feels that a government bank cannot fail and his money is safe.

Attempting to privatise all banks is simply undermining the tremendous contribution of these banks to the country over the years. The nationalisation of private banks in 1969 resulted in the opening of tens of thousands of branches in remote corners of the country. Job opportunities were created for a large section of educated youth. Banks were used to bring about a revolution in agriculture and to carry out activities related to it. Bank loans were available to the weaker sections and small entrepreneurs.


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