'Four Major Public Sector Banks To Remain In Existence, Private Segment Of Banking System Should Grow': Economic Advisor Sanjeev Sanyal

Bhuvan Krishna

Oct 11, 2023, 04:56 PM | Updated 04:56 PM IST

Sanjeev Sanyal, member of Economic Advisory Council to Prime Minister Narendra Modi.
Sanjeev Sanyal, member of Economic Advisory Council to Prime Minister Narendra Modi.

Sanjeev Sanyal, a member of the Economic Advisory Council to the Prime Minister in an interview with financial portal Moneycontrol on 11 October stated that four major public sector banks will remain in existence and continue to play a crucial role in the Indian banking system.

Currently, India has a total of 12 public sector banks.

These include Bank of Baroda, Bank of India, Bank of Maharashtra, Canara Bank, Central Bank of India, Indian Bank, Indian Overseas Bank, Punjab & Sind Bank, Punjab National Bank, State Bank of India, UCO Bank, and Union Bank of India.

Sanyal also mentioned that he believes certain parts of the Indian banking system will continue to be government-owned from a strategic standpoint.

This indicates that the government will maintain ownership in certain areas of the banking sector.

While recognising the importance of public sector banks, Sanyal expressed his support for the growth of the private segment in the banking system.

During the presentation of Budget 2021-22, Finance Minister Nirmala Sitharaman announced the intention to privatise Public Sector Banks (PSBs) as part of a disinvestment drive aimed at raising Rs 1.75 lakh crore.

In a significant move in 2019, the central government decided to merge six weak and disparate PSBs into four larger entities.

This resulted in Punjab National Bank (PNB) taking over Oriental Bank of Commerce and United Bank of India, Allahabad Bank becoming part of Indian Bank, Canara Bank subsuming Syndicate Bank, and Andhra Bank and Corporation Bank merging with Union Bank of India.

Additionally, State Bank of India (SBI) had previously merged five of its associate lenders, while Vijaya Bank and Dena Bank were merged with Bank of Baroda.

During a statement in Mumbai on 29 May, Finance Minister Nirmala Sitharaman confirmed that the bank privatisation plans will proceed as scheduled.

The privatisation of PSBs will not take place until the 2024 elections, according to a government official.

To enable privatisation, amendments will need to be made to the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980.

These Acts, which were responsible for the nationalisation of banks in two phases, must be modified to accommodate privatisation, as per the official.

Bhuvan Krishna is Staff Writer at Swarajya.

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