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Rbi Report Will Privatization Of Public Sector Banks Benefit Or Harm What Is The Intention Of The Modi Govt

A research report by the Reserve Bank of India has suggested not to privatize public sector banks. In the report, the performance of public sector banks has been described as better than private banks in many ways. It has also been said that the role of public sector banks has been more commendable than private banks in achieving the goals of the government. This report is in direct contrast to the policy of the government, in which a strategy is being made to put all the banks in private hands except the state-owned State Bank of India. This report is not an official stand of the Reserve Bank of India, but an opinion expressed by one of its research wing on the issue of privatization of banks. But after this report came to the fore, the opposition and those organizations of bank employees who have been continuously opposing the privatization of banks have become vocal.

Actually, Prime Minister Narendra Modi always talks about making the country a five trillion dollar economy. He believes that to meet the needs of a large economy, there is a need for two to three large-scale banks in the country. It is argued that the big banks will be able to give big loans to the major industries of the country according to the needs of the big economy, whereas the small banks are not able to do this work. Also, the merger of banks will increase their lending capacity and will help in reducing the deficit. This work can be done by privatization of public sector banks and merger of smaller banks. This is the reason why the government is constantly talking about privatization of banks.

Economy experts believe that this view of the Center is based on the model of US-European countries which have huge capital, but less human resources. In these countries, the expectations of the public from the banks are also very limited and there has been a lot of urbanization in these countries, due to which the entire system of these banks is limited to the urban areas. Whereas 70 percent of the population in India still lives in rural areas where income resources are very limited and the size of their economy is very small.

The experience since independence till now shows that private banks have shown no interest in extending their facilities to the rural areas. Banks in rural areas remained out of reach of villages due to very low business as compared to the cost of operation of bank branches. The government makes plans to make people financially empowered by giving them the benefit of loans through public sector banks, but private banks keep away from such schemes. They also try to meet the loan obligation through loopholes.

The biggest argument in favor of privatization of banks is that it will stop corruption in the banking system and prevent fraud of public money, but recently such scams have come to light in which industrialists have colluded with the officials of private banks. Obtained huge loans and later either fled abroad with the money or declared themselves bankrupt.

According to a report, from 1947 to 1955, 360 small banks were sunk, in which people’s deposits of crores of rupees were drowned. In such a situation, the assumption has also proved to be wrong that there will be no corruption in private banks as compared to public sector banks.

Even after nationalization in 1969 and 1980, these banks were merged with nationalized banks by the government from time to time when the condition of private banks deteriorated. Prominent among these were Lakshmi Commercial Bank, Bank of Punjab, Hindustan Commercial Bank, Bharat Bank, Nedungadi Bank, New Bank of India, Global Trust Bank and United Western Bank. While Bank of Rajasthan and Sangli Bank have been given ICICI. merged with the bank. Economic experts say that there can be no guarantee that such situations will not arise again.

Privatization of banks not easy

Banking system expert Ashwini Rana told Amar Ujala that privatization of public sector banks is not an easy process. The biggest reason for this is that the size of public sector banks is so large that it is very difficult for private sector investment to buy them. These banks have huge financial-land assets in every nook and corner of the country which require huge investment to buy.

Pension and NPAs of ex-employees of these banks are other responsibilities that the private sector will never like to take up, so no sector will come easily to buy them. Keep in mind that the government has not been able to privatize many areas for these reasons, even though their total size was very small. In such a situation, it will be very difficult to sell such a large system completely.

He said that it is very important to change the banking system with time, but this change should be done not by selling public sector banks, but by adopting its alternative measures. The system of public sector banks can be improved by adopting digital banking, digital currency, appointment of more technically skilled employees and other measures. This can also reduce the financial burden on the banks.

Key highlights of the Reserve Bank’s report

Many important things have been mentioned in the Reserve Bank’s report which provides many important information about the Indian banking system. This report of the Reserve Bank of India states that privatization of banks is not the solution to the problem. Public sector banks play an important role in financial inclusion, taking government schemes to the far flung areas, bringing banking facilities to the last person.

A look at the banking system

In 1947, there were about 5000 branches of 664 private banks in the country. Today 12 public sector banks, 22 private sector banks, 11 small finance banks, 43 regional rural banks and 46 foreign banks have about one lakh 42 thousand branches in the country. At present, there are 1482 Urban Co-operative Banks in the country, while there are 58 Multi-State Co-operative Banks. About 8.6 crore depositors have deposits of Rs 4 lakh crore 84 lakh in these 1540 banks.

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