The finance ministry has allowed all the private sector banks to participate in business related to government such as small savings schemes and collection of taxes pension payments.
Highlights
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Currently, only some of the big private sectors are allowed to conduct government-related businesses.
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So, now embargo has been lifted and this move will enhance the customer convenience and simulate the competition.
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It will also simulate the higher efficiency in standards of customer services.
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Private banks remain at the forefront of imbibing and implementing the latest technology and innovation in banking. Now they have become the equal partners in the development of Indian economy.
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Now, bar has also been lifted on RBI to authorize the private sector banks along with the public sector banks for Government business and Government agency business.
Background
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Government in the budget 2021-22 had announced to privatise two public sector lenders other than IDBI Bank.
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Government also announced that privatisation of Public Sector Banks (PSBs) is a part of the disinvestment drive to generate Rs 1.75 lakh crore.
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Apart from privatisation of two Public Sector Banks, announcement was also made to privatise the General Insurance company in financial year 2021-22.
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Also, central government had merged 10 public sector banks into four in March 2017. Thus, the total number of PSBs came down to 12 from 27.
Merger of the PSBs
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Under the merger plan, the United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank. It thus became the second largest PSB.
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Syndicate Bank was merged with Canara Bank.
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Allahabad Bank was subsumed under Indian Bank.
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Andhra Bank and Corporation Bank were merged with Union Bank of India.
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SBI also merged five of its associate banks namely, state Bank of Patiala, State Bank of Mysore, State Bank of Hyderabad, State Bank of Bikaner and Jaipur, State Bank of Travancore and Bharatiya Mahila Bank.
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In 2019, Bank of Baroda merged the Vijaya Bank and Dena Bank.