Nirmala Sitharaman Says Bank Privatization Will Not Harm National Interest
Finance Minister Nirmala Sitharaman has described the privatization of public sector banks as a need of the hour. She stated that the nationalization of banks in 1969 did not yield the desired results; they did make progress, but became unprofessional due to government control. The Finance Minister stated that privatization of public sector banks would impact financial inclusion and national interests.
PSU bank shares have seen a strong rally in the stock market over the past few days, and this momentum could continue to gain steam. Finance Minister Nirmala Sitharaman has made a major statement regarding the privatization of public sector banks. A few days earlier, news agency Reuters quoted sources to say that the central government may hike foreign direct investment or FDI limit in PSU banks to 49 percent. Following this speculation, heavy buying was seen in several stocks, including SBI, Punjab National Bank, Bank of Baroda, and Canara Bank.
In this context, Finance Minister Nirmala Sitharaman stated that privatization of public sector banks will not impact financial inclusion and national interest. She stated that the nationalization of banks in 1969 had not yielded the desired results as far as financial inclusion is concerned.
Addressing students at the Diamond Jubilee closing ceremony of the Delhi School of Economics, University of Delhi, she stated that bank nationalization helped advance government programs, but government control has rendered public sector banks unprofessional. She stated that more than 50 years have passed since the nationalization of banks, but the objectives for which they were nationalized have not been fully achieved.
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Finance Minister Nirmala Sitharaman said, "The notion that if you privatize banks, their purpose of reaching out to all will be lost is completely wrong." She emphasized that when banks are allowed to operate professionally and decisions are taken by the board, both national and banking interests are served. Recalling the abuses of public sector banks in the past, the Finance Minister said that this resulted in a deterioration in balance sheets, which took almost six years to correct.
Now, I can confidently say that our public sector banks are better in terms of asset quality, loan and deposit growth, and financial inclusion. In August 2019, the government announced four major mergers of public sector banks, reducing their total number from 27 in 2017 to 12. Effective April 1, 2020, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank. Syndicate Bank was merged with Canara Bank.
Allahabad Bank was merged with Indian Bank, and Andhra Bank and Corporation Bank were merged with Union Bank of India. In 2019, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Earlier, the government merged five associate banks of SBI and Bharatiya Mahila Bank with State Bank of India.
