“Embargo lifted on grant of government business to private banks. All banks can now participate. Private banks can now be equal partners in development of the Indian economy, furthering government’s social sector initiatives, and enhancing customer convenience,” finance minister Nirmala Sitharaman‘s office stated on Twitter.
Embargo lifted on grant of Govt business to private banks. All banks can now participate. Private banks can now be… https://t.co/RmywFuBuPS
— NSitharamanOffice (@nsitharamanoffc) 1614163029000
Markets cheered the move with the benchmark BSE sensex rising over 1,000 points in extended trading session. The broader NSE Nifty settled near the 15,000-mark.
The move will enable “private sector banks (only a few were pern1itted earlier) to conduct of Centre-related banking transactions such as taxes and other revenue payment facilities, pension payments and small savings schemes, the department of financial services (DFS) said in media brief.
This step is expected to further enhance customer convenience, spur competition and higher efficiency in the standards of customer services, it added.
“With the lifting of the embargo, there is now no bar on RBI for authorization of private sector banks (in addition to public sector banks) for government business, including government agency business. The government has conveyed its decision to RBI,” the brief further mentioned.
The government has already announced its intent to privatise two public sector lenders, other than IDBI Bank, in the Budget 2021-22.
Sitharaman, while presenting Budget 2021-22 earlier this month, had announced the privatisation of public sector banks (PSBs) as part of the disinvestment drive to garner Rs 1.75 lakh crore.
“Other than IDBI Bank, we propose to take up the privatisation of two PSBs and one General Insurance company in the year 2021-22,” she had said.
The government last year consolidated 10 public sector banks into four and as a result, the total number of PSBs came down to 12 from 27 in March 2017.
As per the amalgamation plan, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank, making the proposed entity the second-largest PSB.
Syndicate Bank was merged with Canara Bank, while Allahabad Bank was subsumed in Indian Bank. Andhra Bank and Corporation Bank were amalgamated with the Union Bank of India.
In a first three-way merger, Bank of Baroda merged Vijaya Bank and Dena Bank with itself in 2019. SBI had merged five of its associate banks — State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad — and also Bharatiya Mahila Bank effective April 2017.
(With inputs from PTI)