The Reserve Bank gave a warning regarding the privatization of banks, gave this advice to the government
In the year 2020, after the decision to merge 10 big public sector banks into 4 banks, now the government is moving towards privatization. On this haste of the government, the bank of banks i.e. Reserve Bank of India has expressed concern. The Reserve Bank has said that the approach of gradual privatization of banks instead of large scale is good for better results.
The Reserve Bank of India (RBI) on Friday said that the support for gradual merger of public sector banks in a research paper published in the Bulletin is not its view but the opinion of the authors. The research paper is published in the August issue of RBI Bulletin. “Government’s gradual move towards privatization can ensure that there is no ‘zero’ situation in meeting the social objective of financial inclusion,” it said.
Vijay strengthened the banking sector
The Reserve Bank has said that the recent large-scale merger of public sector banks has strengthened the sector. This has resulted in strong and competitive banks. Significantly, in 2020, the government merged 10 nationalized banks into four big banks. With this the number of public sector banks has come down to 12, from 27 in 2017.
Haste has more disadvantages than benefits
In the study, the researchers said, “The large-scale privatization of public sector banks may have more disadvantages than advantages. The government has already announced the privatization of two banks. Thus, a gradual move towards privatization can ensure that there is no ‘zero’ situation in meeting the social objective of financial inclusion and the benefits of monetary policy. The view is that instead of large-scale mergers, the gradual move towards this step announced by the government will yield better results.
Private banks more efficient at making profit
The article titled ‘Privatization of Public Sector Banks: An Alternative Approach’ states that private sector banks are more efficient at maximizing profits. Whereas public sector banks have performed better in promoting financial inclusion.
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