Impacts of Privatisation on Indian Banks on Shareholders and Others

Here we will discuss impacts of Privatisation on Indian Banks as this topic needs much attention. 

India is heading towards a phase of privatisation .

Recently, NITI aayog has recommended the privatisation of three national banks which are Bank of Maharashtra (BoM),Indian Overseas Bank and Punjab and Sindh bank (P&S).

Finance minister Nirmala Sitharaman announced that the government budgeted INR 1.75 lakh crores from stake sale in public sector companies and financial institutions including two PSU banks.

What are the implications of privatisation?

All people related with the bank whether it’s stakeholders, employees or customers .

Consequently All have to bear the impact of privatisation.

Government as shareholder.

When a bank is sold to a private entity ,the government gets back its capital.

The value of this capital depends on the market condition and the strength of the banks.

Therefore government departments like finance ministry, Central Vigilance Commission etc . need not to monitor or supervise these institutions.

Since,there are sufficient banks in operation, government does not face any problem on implementing the government schemes.

Bank customers.

Bank customers does not feel any immediate change .

But after some time ,they get better services and may have to pay the cost of it.

The bank emphasise on mon banking services like mutual funds, insurance etc.

Other shareholders.

As the new acquirer is likely to run the bank more efficiently,the narket may give better value to private.

Hence , the shareholders value is based on performance.

Bank employees.

The bank under a private company will always judge employees on the basis of performance.

Accordingly the non performers will surely be eliminated.

There is no reservation policy in private institutions .

So,everyone has to prove themselves to get a job. So here were some impacts of Privatisation on Indian Banks.

Written By Deepak Kumar (Senior Analyst)

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