All of us are aware that Government wants to push their agenda of banking
sector reforms. Recently there has been a lot of media reports about
banking sector reforms like more FDI in public sector Banks, more foreign
investment in our private banks, proposals of merger of banks, etc.
Even our Hon. Finance Minister has said as under recently in some
programme on 4th November, 2025:
• Bank nationalisation done in 1969 has not yielded the desired result as
far as financial inclusion was concerned.
• Privatisation of banks unlikely to hurt financial inclusion drive, national
interest.
• Government control made Public Sector Banks unprofessional.
Many of our members are wondering why again and again, Government is
talking of banking sector reforms.
Just read the following extract from the IMF Country Report No.
23/426 of December, 2023.
IMF
Recommendation
Authority Status
Improve the
governance and
financial
operations of
public sector
banks (PSBs) and
develop a
strategic plan for
their
consolidation,
divestment, and
privatization
Ministry of
Finance
The January 2018 Banking Reforms Roadmap lists
six “reform themes”, including strengthening public
sector banks (PSBs); increasing credit supply; and
deepening financial inclusion and digitalization. A
first assessment of reform progress was released in
February 2019.
• More recently, more leadership posts were
created at PSBs by separately appointing non-
Executive Chairpersons alongside the post of CEO/
Managing Director. The Banks Board Bureau,
established by the government in 2016 as an
autonomous recommendatory body, is now
responsible for advising the government, includingon the selection and appointment of Board of
Directors in PSBs; matters relating to appointments,
confirmation or extension of tenure and
termination of services of the Board of Directors,
and suitable training and development programs for
management personnel in PSBs.
• Plans announced in August 2019 involve
enhancing PSBs’ management accountability to the
Board. PSBs can now recruit Chief Risk Officers
from the market. The terms of directors on the
Board’s Management Committee will be extended
to strengthen their contributions, the loan sanction
thresholds for approval by Management Committee
of Board (MCB) were raised to enable more focused
attention to higher-value loan proposals, and a
mandate was given to Boards for training directors
and evaluate their performances annually.
• The number of PSBs as of March 2021 stands at
12, reduced via consolidation within PSBs space. A
majority stake in a PSB (classified as other- PSB)
was sold to the state-owned Life Insurance
Corporation of India and the bank has been
classified as private sector bank since January 21,
2019, for regulatory purpose.
• In the recent budget speech, Finance Minister of
India has announced that in addition to IDBI Bank,
two Public Sector Banks will be privatized.
Government of India and RBI are discussing the
modalities.
If we connect the dots, we will understand why Government talks of
banking sector reforms. Banking sector reforms are conditionalities of IMF
which the Government has accepted.
Hence our struggle will be sustained. Intensify our campaign to create
public opinion and enlist broader support.
