reserve Bank of India ,reserve Bank of India) on Friday issued clarification on a bulletin article on privatization of the public sector banks,

a Press release RBI said the following:

“As expressly stated in the article, the views expressed in the article are those of the authors and do not represent the views of the Reserve Bank of India.

The press release related to the August 2022 Bulletin highlights that “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”.

The last paragraph of the article mentions, inter alia, that:

• “From the traditional view that privatization is the panacea for all ills, economic thinking has come a long way to recognize that a more nuanced approach is needed to pursue it”;
• “Recent Mega Merger” public sector banks This has resulted in the consolidation of the sector, creating stronger and more robust and competitive banks”;
• “A big bang approach of privatization of these banks may do more harm than good. The government has already announced its intention to privatize the two banks. Such a gradual approach will ensure that large-scale privatization does not create a void in meeting the important social objectives of financial inclusion and monetary transmission.”
• Thus, the researchers are of the view that rather than a one big bang approach, a gradual approach announced by the government would result in better results.”

The release also said that the researchers are of the view that rather than the big bang approach, a gradual approach announced by the government would result in better results.

RBI had said that India’s state-run banks have gained more market confidence in recent years and a big-bang approach to privatize these lenders could do more harm than good.

It added that if the sole objective is not simply profit maximization, state-run banks outperform their private counterparts in promoting financial inclusion and help countercyclical monetary policy action gain traction.

“Public sector banks are not solely guided by maximizing profit targets and have integrated desirable financial inclusion goals into their objective function unlike PVBs (private banks),” the central bank wrote in its bulletin published on Thursday.

(with inputs from agencies)