2021-08-04 19:15:51
I received a lot of emails about Privatisation due to recent news about general insurance employees going on strike & about govt deferring Privatisation of 2 state run banks to FY23. Naturally, people are very worried. Rightly so. I've also been guiding lots of RBI Grade B interviewees who are often asked about their views on privatisation. So I thought I'll share the pros and cons here with all of you so that you can better structure your views on this topic.
PROS (YES, Privatize): 1. more competition, opening up of banking will attract more foreign investors, book value of stocks to go up
2. PSBs are often slow & stable while pvt banks are agile & nimble
3. customer service will become a focus point, many PSBs struggle with it
4. (allegedly) NPAs will reduce since vetting of loans is very stringent in pvt banks [though I disagree personally with this point due to many reasons]
CONS (DO NOT Privatize): 1. social mandate of banking & financial inclusion will suffer since pvt banks hate to give those loans & even rely on PSLCs to fulfil their PSL quota
2. bottom section of employees have bad work culture with low pay while top management gets all profits
3. too much pvt banking focus might lead to financial bubbles like we saw in GFC 2008
4. creation of monopolies if same promoters own companies & banks leading to conflict of interest
I don't believe in privatisation, there are better ways to fix Indian banking sector with the first one being- hire more qualified staff & empower them to make decisions instead of crippling them with bureaucracy (but ofc you can never go against the govt's stance in any bank interview. Always give a balanced take in interviews).
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