What are the Problems in Public Sector Bank Privatization ?

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Thursday, 15 April 2021

What are the Problems in Public Sector Bank Privatization ?

Government is planning to bring an amendment in the monsoon session of parliament for relaxing the banking regulation act. Government is planning for amending all the relevant laws at once, so that the process of PSB privatization is not hindered by any legal hurdles.


Now checkout the major hindrance in privatizing the Public Sector bank as per the existing norms. 


Following are the major hindrance in the privatization of Public Sector Banks. Government is looking after the amendment of the bills in the parliament for easy process through. 

1. Discussion are taking place within the government on whether to repeal the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 (nationalisation Acts). 

2. The voting rights cap of 10% for a non-government shareholder irrespective of his/her shareholding is among the key constraints identified. 

3. As per Banking Regulation Act, 1949, that no shareholder of a banking company – PSB or private sector bank – can exercise voting rights more than 26%. 

4. Providing higher voting rights to the promoters 

5. Before repealing the bank nationalization laws, a procedure has to be developed for transition of the PSBs from under these Acts to the Companies Act. 

6. RBI to change its current stance which is towards limiting promoter control.

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