Budget 2022: Will Finance Minister Nirmala Sitharaman succeed in provoking privatization agenda?

#NewDelhi: According to banking sector experts, the central government may provide the necessary clarification on the privatization of public sector banks (PSBs) in the 2022 central budget. Especially economically weak banks may have to be privatized. However, opposition from trade unions has made it difficult for the government to make the plan a success.

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Suresh Khatanhar, Deputy Managing Director, IDBI Bank, said, “The central government may focus on privatization of low performing public sector banks and increase the capital of well-managed and economically viable public sector banks.”

Privatization – an agenda

Privatization of public sector banks is a long-standing government agenda. So far, however, the government has managed to bring only a few state-owned banks under one umbrella. Following an announcement by Union Finance Minister Nirmala Sitharaman in 2019, 10 government-run banks have been amalgamated into 4 banks.

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In the government’s move, Punjab National Bank (PNB) acquired Oriental Bank of Commerce and United Bank. PNB became the second largest public sector bank in India after State Bank of India (SBI). Similarly, Syndicate Bank is associated with Canara Bank. Union Bank of India was given the name of Andhra Bank and Corporation Bank and Corporation Bank while Allahabad Bank was given the name of Indian Bank.

In the 2021 Union Budget, the Finance Minister said that three entities would be privatized this year. “Apart from IDBI Bank, we are planning to privatize two government banks and one general insurance company in 2021-22,” he said. However, the government has not taken any action on Nirmala Sitharaman’s remarks.

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Suresh Khatanhar added that the government may first look at the digitization of public sector banks so that they can compete with other competitors in terms of technology.

Trade union protests

Bank employees’ trade unions in India have strongly protested against the privatization of state-owned banks. According to them, such a move would make many unemployed. The United Forum of Bank Unions (UFBU), an organization of Indian bank employees, called for a two-day All India Bank strike on December 16 and 17 in protest of the Banking Law (Amendment) Bill, 2021.


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