According to Subbarao, coming up with a roadmap will give the much needed predictability to the stakeholders. He further said that the big bang approach for privatization of state-owned banks is not desirable, however, the issue should not be put on the back burner.
“Ideally, we should have a road map for privatization of all public sector banks, perhaps in a time frame of 10 years. This will give the much needed forecast for all stakeholders,” PTI quoted him as saying.
Subbarao said that the government should also think about corporatisation of public sector banks so that they come under a uniform RBI regulation.
In Union Budget For 2021-22, the government announced the privatization of two public sector banks in the year and approved a policy of strategic disinvestment of public sector enterprises.
Government Think Tank NITI commission Has already suggested two banks and one insurance company Core Group of Secretaries on Disinvestment for privatization.
According to Subbarao, the privatization of PSBs will affect the Indian economy in two ways.
“The overall efficiency of the banking system will improve as the public sector banks, freed from the responsibility of pursuing social objectives, will strive to maximize profits like their private counterparts,” he said, adding that financial inclusion and priority sector As such there may be some compromise in lending in pursuit of social objectives.
Still, Subbarao said he believes the net cost benefit calculation of privatization will be positive.
In 2020, the government merged 10 nationalized banks into four major lenders, taking the number of public sector banks to 12.
The former RBI governor said that at the current stage of India’s development, the country should use other means to further social objectives instead of burdening bank depositors and borrowers.
A research paper published in the August 2022 issue RBI Bulletin “The gradual approach to privatization adopted by the government can ensure that a void does not arise in meeting the social objective of financial inclusion”.
(with inputs from PTI)