No economic reason to privatise banks -Aunindyo Chakravarty

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published Published on Aug 8, 2020   modified Modified on Aug 9, 2020

-The Tribune

Is there a case to be made for privatisation to help the government raise funds and reduce its fiscal burden and avoid having to recapitalise them every now and then? It is based on an entirely faulty understanding of why the govt needs to own banks. Banks are instruments through which capital flows into the economy.

Bank privatisation is a hot topic again. It kicked off when Finance Minister Nirmala Sitharaman hinted that the government would like to have at least one company in each strategic sector and sell off everything else. That meant, except for a couple of big government banks, the others could be put on the block. In the past week, the privatisation chorus has become louder. The NITI Aayog was reported to have suggested that three government banks — the Punjab & Sind Bank, UCO Bank and the Bank of Maharashtra be sold off. An RBI director proposed that the government reduce its shareholding in public sector banks (PSBs) to 26 per cent. And, former RBI Deputy Governor Viral Acharya recommended that ‘healthy’ government banks should be privatised.

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The Tribune, 8 August, 2020,

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