- One of the most notable proposals offered by the Union Finance Minister in her Budget presentation for the year 2021-22 was to announce the privatization of two public sector banks and one general insurer. People in the know will duly acknowledge that we all have been hearing about the moves to privatize and disinvest from the loss-making public holdings for a long time. There is any number of white elephants causing a drain on the exchequer but none of the successive Union Government pressed ahead with the unpopular move for fear of antagonizing the large employees as also accompanying belief to not disturb the cultivated vote banks.
PC: indiatvnews
- Routinely, the Government in power offered mere lip services and announcements for the consumption of economic experts and filling the news headlines marking the occasions but seriously lacking in resolve to ensure logical conclusion. However, the incumbent Union Government has set some welcome standard in coming out with surprising moves right through its tenure. In line with the same marking big shift in approach as the privatization of banks has been a politically tricky issue, the Finance Minister’s announcement will entail vehement opposition from a largely unionized workforce as well as political opposition that doesn’t believe in the move.
- People in the know would wholeheartedly welcome the proposed positive move, though there are reasons enough to be skeptical looking at some of the earlier experiences in attempting to privatize without backed by a sound strategy invariably resulting in as a non-starter. Needless to mention, intent in the absence of an all-rounded stratagem would ensure privatization move would not proceed any further. Move, we have to. Over the last three years, there is a definite churning in India’s public sector banks since the Government attempted to build scale through the medium of mergers bringing a wider geographical footprint under each bank.
PC: William Derrickson
- Recollect that three rounds of consolidation have shrunk public sector banks from 27 in March 2017 to 12 in April 2020 and now two more are in the pipeline for privatization. It’s a tightrope walk for the Government as exiting commercial operations in the financial sector identified as a tactical sector would obliterate any wish to retain even a minimum presence. An ideal scenario would be to preserve the better run and profitable public sector banks by attempting to sell the weakest. Make no mistake, such an attempt is unlikely to succeed and we have witnessed the futility of the same to sell loss-making Air India failing to attract a single bid owing to attached conditions which were grossly unattractive.
- Businessmen and investors pumping in great money would be looking at maximizing returns by evincing interest in profit-making entities alone rather than poorly managed and weakest banks. Thus, it makes imminent sense for the Government to take a back seat and initiate moves to privatize sounder banks. Envisaged bids should not exclude foreign banks from participating which have a substantially long presence in the country. Therefore, people in the know would wait eagerly as to how things will unfold on the matter in the days ahead
