Navigating Bank Privatisation: A New Era for India's Financial Sector

Finance Minister Nirmala Sitharaman reassured stakeholders that privatising state-owned banks will not harm financial inclusion or national interests. Speaking at the Diamond Jubilee Valedictory Lecture at Delhi School of Economics, she highlighted the shortcomings of the 1969 bank nationalisation regarding financial inclusion.

Sitharaman noted that while nationalisation advanced priority sector lending, government control rendered public sector banks less professional. Post-professionalisation, even previously unmet objectives are flourishing. She dismissed concerns about privatisation impeding banking access, citing past misuse of public sector banks leading to impaired balance sheets.

She further explained that government control, such as the 2019 sale of IDBI Bank shares to LIC, and its subsequent strategic stake sale plan, aligns with broader banking reforms. Major bank mergers since 2019 have reduced the total number of public banks, enhancing operational efficiency and fostering a robust banking sector.