Finance Minister Nirmala Sitharaman during the Budget 2021-22, announced the privatization of public sector banks (PSBs), which is going to be a part of the disinvestment drive to earn Rs. 1.75 lakh crore for the government. As a way forward to this, the union government is set to introduce the Banking Laws (Amendment) Bill, 2021, during the ongoing winter session of the Parliament in December 2021. This move is will bring down the minimum government holding in the PSBs from 51% to 26%.
According to the list of legislative business for the Winter Session, "To effect amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949 in the context of Union Budget announcement 2021 regarding privatization of two Public Sector Banks."
The NITI Aayog earlier suggested two banks and one insurance company to Core Group of Secretaries on Disinvestment for privatization. According to reports available in the media, the Central Bank of India and Indian Overseas Bank can be 2 candidates for the bank privatization move.
However, banking unions are not happy with the government's decision, recently they organized a protest, the 'Bank Bachao Desh Bachao Rally' at Jantar Mantar, New Delhi. Soumya Datta, General Secretary of All India Bank Officers' Confederation (AIBOC) officially stated, "In case the government tables and passes the bill paving the way for the privatization of the public sector banks, the bank officers will unite all the stakeholders of the banking sector and launch a nationwide agitation."
Indian banks are already dealing with the NPA issues, which have started to recover in the very recent past. With steps like bank privatization, some concerned citizens are thinking that the banks might face turmoil. Common people's money can be unsafe at that time. Money withdrawal policy from a bank can also be much tighter or restricted.
Bank Nationalization, 50 years ago, history made
On July 19, 1969, Indira Gandhi, the then Prime Minister, and Finance Minister nationalized the 14 largest private sector banks in India, which is considered as one of her biggest achievements, done for the benefit of common citizens. In 2019, the nation completed 50 years of the Bank Nationalization move. At that time, the Imperial Bank was made a state-owned bank and was renamed the State Bank of India in 1955, which is the largest public sector bank in the country now. During this time, the union government took hold of 80% of the banking assets under control.
According to the RBI, the bank nationalization was the "single most important economic decision taken by any government since 1947. Not even the reforms of 1991 are comparable in their consequences - political, social and, of course, economic."
Bank privatization certainly is a big reform for the Indian economy, and bank unions are thinking that the privatization process will lead to many other nationalized banks, rather than just the 2 banks, mentioned earlier. This will eventually hamper common citizens' interests. They are continuing their protest, and in mid-December, the bank unions will be on strike for 2 days.
Allowing privatization of public general insurance companies
In the last session, the government passed a bill that will allow the privatization of state-owned general insurance companies, through the General Insurance Business (Nationalisation) Amendment Bill, 2021. This bill similarly removed the clause to hold at least 51% of the equity capital in a specified insurer by the union government.
The current government has been under much criticism from the civil society and the concerned citizens for many bills and laws, proposed/passed in Parliament. Recently the government had to revoke the farm laws, for pressures and protests by the farmers, as they said it will only benefit the big corporates and not the poor farmers.