Chief Economic Adviser Krishnamurthy Subramanian said that banking will eventually become a strategic sector where there will be four or less public sector banks while the rest will be put into the private sector. He added that the Union Budget announcement of privatisation of two public sector banks in 2021-22 is only the beginning of the process.
A little more than 51 years after Indira Gandhi, prime minister and finance minister at the time, nationalised 14 largest banks, the nation aims to reduce it to just four.
“While there have been many wins under bank nationalisation, we haven’t done as well as we could have,” Krishnamurthy Subramanian, chief economic adviser to the Government of India, told BloombergQuint’s Ira Dugal in an interview. Finance Minister Nirmala Sitharaman in her budget speech on Feb. 1 said two public sector banks would be privatised in the upcoming financial year. She, however, didn’t name the lenders.
According to Subramanian, that’s a welcome move. Private banks, on an average, have performed much better than public peers plagued by large corporate loan defaults and bad loans, he said. The objective of privatisation, he said, is to enhance quality and quantity of credit dolled out to the economy. “Banking will be a strategic sector where there will be four or less PSBs, but the rest will slowly be unwound and put into the private sector,” Subramanian said, adding the finance minister’s announcement in the budget is only the beginning of this process.
News source : Bloomberg Quint