{"id":193248,"date":"2022-06-30T20:40:02","date_gmt":"2022-06-30T15:10:02","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=193248"},"modified":"2022-06-30T20:40:02","modified_gmt":"2022-06-30T15:10:02","slug":"full-privatization-of-psbs-our-bank-privatization-agenda-demands-clarity","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/full-privatization-of-psbs-our-bank-privatization-agenda-demands-clarity\/","title":{"rendered":"Full privatization of PSBs: Our bank privatization agenda demands clarity"},"content":{"rendered":"\n

News<\/strong>: According to media reports, investment banks and other likely investors have recently asked the government to fully withdraw the Centre\u2019s share from PSBs for facilitating a better disinvestment process and value discovery. This raised debate on the privatization of state-owned banks once again.<\/p>\n\n\n\n
Must read: Privatization of PSBs \u2013 Explained, Pointwise<\/a><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
What are the advantages of full privatization of PSBs?<\/h5>\n

1)<\/strong> Improve capital allocation efficiency and overall productivity by an order of magnitude, 2)<\/strong> Will take care of PSB networks, outdated systems and stifling bureaucracy, 3)<\/strong> Might avoid poor decision-making by providing better incentives.<\/p>\n

Other benefits of privatization of PSBs include reduction of public sector dominance of the banking sector and promotion of allocative efficiency.<\/p>\n\n\n\n
Must read: Privatization in India and related issues | Timeline<\/a><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
What is the legal challenge to the full privatization of PSBs?<\/h5>\n

But that faces a legislative challenge. Because Section 3(2B)(c)<\/strong> of The Banking Companies (Acquisition and Transfer of Undertakings) Act of 1970 requires the government to hold at least 51% of a PSB\u2019s paid-up capital at all times. The government will have to amend this Act if it wants to sell all its equity.<\/p>\n

Other challenges<\/strong>: Formalization of credit, financial inclusion and providing the Centre and states with transaction processing platforms for the delivery of direct benefits to underserved Indians will take a huge hit.<\/p>\n\n\n\n
Read more: Hope fades for PSBs<\/a><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
What should be done?<\/h5>\n

End dual governance<\/strong>: The government has to end its twin-track governance model for PSBs, with the regulator always second-guessing the dominant shareholder\u2019s next move.<\/p>\n

For example, while the Reserve Bank of India (RBI) must approve the appointment of private bank CEOs, the government\u2019s choice of chief executives is binding on RBI.<\/p>\n

Improve governance<\/strong>: The Centre\u2019s tussle with PSB boards gives rise to various forms of rent-seeking and thereby creating a problem of bad loans. The government should focus on improving PSBs standards of governance, rather than simply trying to offload them via bulk stake sales.<\/p>\n

These will foster a viable financial sector with both PSBs and Private sector banks to support the Indian economy.<\/p>\n

Source<\/strong>: The post is based on the article\u00a0\u201cOur bank privatization agenda demands clarity\u201d <\/strong>published in\u00a0\u201cLivemint\u201d<\/strong>\u00a0on\u00a030th<\/sup>\u00a0June 2022<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"

News: According to media reports, investment banks and other likely investors have recently asked the government to fully withdraw the Centre\u2019s share from PSBs for facilitating a better disinvestment process and value discovery. This raised debate on the privatization of state-owned banks once again. Must read: Privatization of PSBs \u2013 Explained, Pointwise What are the… Continue reading Full privatization of PSBs: Our bank privatization agenda demands clarity<\/span><\/a><\/p>\n","protected":false},"author":10311,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[216,10501],"class_list":["post-193248","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-gs-paper-3","tag-live-mint","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704792881},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/193248","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10311"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=193248"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/193248\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=193248"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=193248"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=193248"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}