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Privatization of banks: RBI has said that privatization of public sector banks will do more harm than good!

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Privatization of public sector banks: On the one hand, the government aims to privatize two public sector banks in the current fiscal year 2022-23. And there are plans to privatize more banks in the coming days. But the question was raised in the article written in RBI on the government’s decision to privatize state-owned banks. RBI wrote in its article that large-scale privatization of public sector banks can cause more harm than good.

The Reserve Bank of India (RBI) has warned in an article advising the government to proceed with caution in the matter. An article published in the RBI Bulletin stated that private sector banks have been successful in making more profit, they are also efficient in this area while public sector banks have done better in promoting financial inclusion. The article said: “Privatization is not a new concept and its advantages and disadvantages are known to all. Privatization has traditionally been the key solution to all problems, while economic thinking has found that it requires a cautious approach to pursue it.

Let us tell you that last month the central government was suggested to privatize all public sector banks except State Bank of India. This suggestion was given to the government by former NITI Vice President Aayog Arvind Panagariya and Poonam Gupta of ACAER who prepared a report in this regard. The report indicates that the market share of private banks has increased and they have emerged as a better option than public sector banks.

The report states that over the past decade, except for SBI, all other public sector banks have lagged behind private banks in all aspects. The cost of operating public sector banks has increased, so the loans they provide have decreased. According to the report, these public sector banks achieved lower returns on assets and equity than private banks. Public banks lag far behind private banks in terms of deposits and loan advances.

Unions of public sector bank employees also oppose the privatization of public sector banks.

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