Only 4 banks including SBI, will remain government: Niti aayog recommended

Only 4 banks including SBI, will remain government: Niti aayog recommended

For privatization of banks, the Modi government can repeal the Banking Companies Act enacted in 1970 for nationalization of banks. It will not be difficult for the government to do so as it is able to pass the bill from both houses of Parliament.

NITI Aayog has also prepared the blueprint for privatization of banks. The commission has suggested the central government to keep control over 4 public sector banks.

•  State Bank of India
• Punjab National Bank
• Bank of Baroda
• Canara Bank.

Apart from this, the Commission has advised to privatize three small public sector banks Punjab and Sindh Bank, Bank of Maharashtra and UCO Bank on priority basis. Other government banks (Bank of India, Union Bank, Indian Overseas Bank, Central Bank and Indian Bank) will either merge with the 4 remaining banks or reduce their stake. The government can limit its stake in these banks to 26%.

This proposal can be presented before the cabinet soon.

Reason

• Government source said that after the Moratorium implemented till 31 August and then restructuring of loans for 2 years, there is a need to invest large amounts of capital in banks.
• The government is preparing a plan to move slowly on privatization so that maximum amount can be obtained. From 2015 to 2020, the central government had invested Rs 3.2 lakh crore in state-run banks in bad loans.

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Promotion of privatization in other areas as well

• Apart from banks, Modi government is also promoting privatization in other sectors. Apart from privatization of oil marketing company Bharat Petroleum Corporation Limited, the government has also prepared to approve private companies in the field of coal mining.
• Talking about banking sector, due to mergers and privatizations in the last 3 years, the number of state-run banks has been reduced from 27 to 12, which is now set to be limited to 4.

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