Big bang privatization of banks can be harmful: RBI

Contact Counsellor

Big bang privatization of banks can be harmful: RBI

  • Union Budget for 2021–22 had mentioned plans to privatise two public sector banks (PSBs). Now the proposal to privatise the Industrial Development Bank of India (IDBI) Bank has been revived.

Recent RBI report on bank privatisation

  • Big-bang privatisation of public sector banks can do more harm than good, authors of an article in the latest RBI bulletin have warned, asking the government to take a nuanced approach on the issue.

Findings of the 2022 report

  • While private sector banks (PSBs) are more efficient in profit maximisation, their public sector counterparts have done better in promoting financial inclusion.
  • "Privatisation is not a new concept, and its pros and cons are well known. From the conventional perspective that privatisation is a panacea for all ills, economic thinking has come a long way to acknowledge that a more nuanced approach is required while pursuing it.
  • The gradual approach to privatisation adopted by the government could ensure that a void was not created in fulfilling the social objective of financial inclusion and monetary transmission.