Should Government consider Privatizing Public Sector banks? Essay : Privatization of Public sector banks has been a debate for several years and in talks with the Government of India. Most of the Public Sector bank cater to a vast majority of the remote and rural population, as a result of which they provide loans and other schemes at a very low or zero interest rate. This can affect the fiscal condition of the economy. Due to large amount of loan waivers and varied government schemes provided at no charge to the rural population by these banks have caused to reduce the capital, which at times lead to debt condition of these banks thus requiring additional capital to be fused into these Public Sector Banks.
Most of the Public sector banks have a wide reach in the remote villages, making banking facilities convenient for the rural population. However, with minimal earning capacity on interest on loans and waivers, there tends to reduction in staff capacity and thus pitting pressure on existing staff with minimal salaries and loaded with high volume of work. Here as well these banks require huge capital investment from the Government. The Non performing assets of these banks has also led for the government to bring privatization into the public sector banks.
The privatization of Public sector banks will lead to loss of jobs of the employees of the public sector banks as the private sector banks would bring in their staff and take over these PSBs. The private bank are also more focused on profit making, where in the interest rates on loans, bank charges, and charges on other facilities prove to be very high in comparison to public sector banks, this will demotivate the rural population to invest and save their money in these private sector bank.
The public sector banks are more focused and cater to rural population whereas private sector banks cater more to the urban population. This will lead to financial services being ignored to the rural sections of the society.
The public sector banks still face the debt condition and fiscal losses affecting the fiscal position of the economy. Privatization will help these banks to raise their capital investment and help increase the fiscal condition of the society to a certain extent.
Certain banks like the central bank are already on phase of been taken of by private banks. However there have been many failures of private banks as well. As a result of which the privatization of the PSBs could also affect the fiscal position of the PSBs.
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