Public or Private: What Should be the Approach for Future Banking?

Banking in India forms the base for the economic development of the country. Over years, the banking sector in India has witnessed several reforms with finally the Finance Minister Nirmala Sitharaman announcing the administration’s plan to privatise two public sector banks, as part of a larger plan to privatise even more PSBs. India, in its history, has witnessed the conversion of private sector institutions to the public sector through the nationalisation of 14 commercial banks in 1969 (First Phase of Nationalisation) and 6 other banks in 1980 (Second Phase of Nationalisation). However, this would be the first time that India is witnessing the privatisation of national banks. This would cause a dilemma regarding how to initiate the process of privatisation especially in the legal parlance like whether to enact new laws or to nullify the existing laws or to amend it or in case of amendment, what kind of an amendment is required. Such an action would have social, political and economic consequences. However, the most important aspect would be to weigh the pros and cons of such an action and decide whether privatisation can serve as the panacea for the crisis.