Union Finance Minister Nirmala Sitharaman has announced the Centre’s decision to lift the embargo on the grant of government businesses to private banks. On her Twitter handle Nirmala Sitharaman declared that all private banks can now be “equal partners in the development of the Indian economy.”
“Embargo lifted on the grant of Govt business to private banks. All banks can now participate. Private banks can now be equal partners in the development of the Indian economy, furthering Govt’s social sector initiatives, and enhancing customer convenience,” the finance minister tweet read.
Embargo lifted on private banks
Earlier, only a few banks were permitted to conduct government-related banking transactions.
“With the lifting of the embargo, these banks can conduct government-related banking transactions such as taxes and other revenue payment facilities, pension payments, small savings schemes, etc,” the Ministry of Finance stated in a press release.
This step is expected to further enhance customer convenience, spur competition and higher efficiency in the standards of customer services.
“Private sector banks, which are at the forefront of imbibing and implementing latest technology and innovation in banking, will now be equal partners in the development of the Indian economy and in furthering the social sector initiatives of the Government,” the release read.
There will be no bar on the Reserve Bank of India (RBI) for authorisation of private banks for government businesses, including government agency businesses, the statement from the department of financial services added. The Centre has already conveyed its decision to RBI, it mentioned.
The announcement by the Centre comes days after Nirmala Sitharaman, while presenting the country’s first paperless budget on 1 February, had noted that more public sector lenders would be privatised in the upcoming fiscal. “Other than IDBI Bank, we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22,” she had said.
Last year, the government had consolidated 10 public sector banks into four and as a result, the number of PSBs came down to 12
At present only state-owned banks and large private sector banks are eligible to conduct government businesses. Analysts said that this will help boost revenues for private banks.