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Bank Privatization – A Bitter Pill – Research & Ranking

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Hope you liked our previous article on how banks are making the transition from branch banking to online banking. Check it out here.

In this article, we will shed light on another transformation that is happening for Indian banks – the privatization of PSU banks. The current government has already stated that it doesn\’t want to do business. According to the government, it is better for corporates and business houses to do business. The role of the government should be that of a facilitator through rightful reforms, regulations, and taxation.

As you read further, you will learn how this facet of the banking sector influences the stock market and what this means for investors like you and me.

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HISTORY OF PRIVATIZATION IN INDIA

 Let us take a look at the history of privatization in India. In fact, we have a history of nationalization and privatization at different points of time, which were relevant and necessary in their own context and time frame.

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Source: Web sources

REACTION TO PRIVATIZATION ANNOUNCEMENT

The government has been very vocal about the privatization of state-owned entities, more so about banks. The PM famously remarked that \”The government has no business to be in business\”. While the FM during Budget 2021, has adopted a more cautious tone saying that, “Not all public sector banks would be privatized. Even for those banks which are likely to be privatized, the privatized institutions too will continue to function after privatization”.

However, some sections of the banking sector have necessarily agreed to the privatization proposal. PSU bank employees went on a strike following the privatization announcements. Nearly 10L PSU bank employees under the All-India Bank Employees Association went on a two-day strike on 15th and 16th March 2021.