RBI Distances Itself from Article Published in Its Monthly Bulletin on Privatisation of Public Sector Banks
Moneylife Digital Team 19 August 2022
After media reports citing an article published in the Reserve Bank of India (RBI)'s monthly bulletin, the central bank has clarified its view on the privatisation of public sector banks (PSBs). It says , "...the views expressed in the article are those of the authors and do not represent the views of the RBI.
 
In the August bulletin of RBI, there was one article titled "Privatisation of Public Sector Banks: An Alternate Perspective". It is written by Snehal S Herwadkar, Sonali Goel and Rishuka Bansal from the banking research division in the department of economic and policy research of RBI. 
 
In their concluding remark, the authors stated, "From the conventional perspective that privatisation is a panacea for all ills, the economic thinking has come a long way to acknowledge that a more nuanced approach is required while pursuing it. Recent mega-merger of PSBs has resulted in consolidation of the sector, creating stronger and more robust and competitive banks."
 
"...a big bang approach of privatisation of these banks may do more harm than good. The government has already announced its intention to privatise two banks. Such a gradual approach would ensure that large-scale privatisation does not create a void in fulfilling important social objectives of financial inclusion and monetary transmission," the article says. 
 
However, citing this article, some media reported that RBI is against the privatisation of PSBs. RBI clarified that its press release relating to the August 2022 bulletin highlights that "the gradual approach to privatisation adopted by the government can ensure that a void is not created in fulfilling the social objective of financial inclusion".
 
"Thus, the researchers are of the view that instead of a big bang approach, a gradual approach as announced by the Government would result in better outcomes," the central bank says.
 
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