Privatisation of Banks

Privatisation of Banks

The privatization of any institution is the process of transferring the ownership from the government to the private hands. As we all know that India has 19 Nationalized Banks which act under The Reserve Bank of India and Indian Government.

Pros of Privatization of Banks

Many Organisations in India conducted surveys and found that the privatization of the Banks will result in quite positive outcomes. It led the Indian Government to think about the privatization of all the Banks. Let’s see why privatization of Indian Banks has become indispensable for the Government of India:

1. It is found that the Private sector banks are more advanced than Public sector Banks and are also working more efficiently.
2. The foreign investors prefer to invest in private sector banks rather than the public sector banks.
3. The private sector banks are much strict against loans and frauds.
4. Public Sector banks are usually less competitive than the private sector banks.
5. Private sector banks are obedient and quite serious towards their work and responsibility which lacks in the most of the Public sector banks.
6. The private sector banks follow the concept of lowest risk.
7. Privatization will also help to reduce the burden of the Government of India.

Cons of Privatization of Banks

No doubt the private sector banks are very efficient but they also fail somewhere. Privatization of the banks leads to several undesirable situations. Some of these are:

1. The privatized banks will focus on maximizing their benefit and it will put an adverse effect on the middle class and poor people of the society.
2. Every organisation, whether government sector or private sector, has some issues within its structure. It is not necessary that a private sector bank will never go with any fraud.
3. The people in present India mostly believe on Public Sector Banks and don’t prefer to deposit their savings in private sector Banks.
4. The public sector banks usually work on social welfare while the motive of private sector banks is generation of profit.
5. Many government schemes like “Jan-Dhan Yojna” and “Pension Yojna” worked well and also became successful only because they were applied in Public Sector Banks.
6. Another disadvantage of privatization is the excess use of nepotism which will affect the banking services.

Impact of Privatization of Banks in India

Privatization of Banks will definitely have some positive and also some adverse effect directly on society and indirectly on economy.

Privatization of banks will be helpful in getting a better customer service. It will also affect the economy and helps in growth. It may be said that the privatization of Indian Banks will remove irregularity and bring punctuality and will led to accountability in the service. It is obviously seen that the private institutions provide incentives to the employees according to their work so Privatization of Banks will definitely increase the productivity of the employees.

One of the most adverse affect of privatization will be the widespread economic gap. It will support the rich people of the society leaving poor behind. This concept will make poor poorer. Also the Privatized banks will mainly focus on urban areas and it will slowly diminish in rural areas of the nation.