Sources close to the government have indicated that the upcoming Union Budget session, starting July 23, 2024, may see proposals for amending the Banking Regulation Act and other relevant legislation. These amendments could pave the way for the government to reduce its ownership stake in Public Sector Banks (PSBs) below 51%.What are PSBsIn India, public sector banks (PSBs) are those where the government holds a majority stake. These banks, originally private, were nationalized by the government in stages to expand financial inclusion and make credit more accessible to the public. The first major nationalization wave occurred in 1969, forming the State Bank of India (SBI), the countrys largest PSB. Subsequent nationalizations in the following decades increased the governments presence in the banking sector.Steps in the same lineThis potential shift comes after a previous attempt in the 2021 winter session to amend the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980, which were instrumental in nationalizing banks in the past. Finance Minister Nirmala Sitharaman, during the 2021 budget presentation, had announced plans to privatize two PSBs and one general insurance company.Aim for privatisation The push for privatization follows a consolidation drive undertaken in April 2020. This initiative reduced the number of PSBs from 27 to 12, in March 2017. Mergers included combining the United Bank of India and Oriental Bank of Commerce with Punjab National Bank, Syndicate Bank with Canara Bank, Allahabad Bank with Indian Bank, and Andhra Bank and Corporation Bank with Union Bank of India. Bank of Baroda had already merged Vijaya Bank and Dena Bank in 2019. SBI had also undergone a consolidation process in April 2017, merging five of its associate banks.Budget 2024The upcoming budget on July 23 will likely see discussions surrounding these potential amendments to banking regulations and their impact on PSBs.
