Finance minister Nirmala Sitharaman on Monday told the News18 Network that the government had engaged with the Reserve Bank of India in a “big way” as she outlined a timeline for meeting divestment targets set in her Budget 2021 speech.
Speaking to News18 Network’s Editor-in-Chief Rahul Joshi, the finance minister said that the country needs efficient banks for the economy to take the next step and return to the growth path, and cannot have laggards.
She said there was a sentiment around public sector banks that they could not be "touched" but that cannot be the guiding principle for the government. “We want more public sector banks but they have to be functionally strong, professionally managed and those that can meet the demands of a growing aspirational India.
"If I am going to be sitting around with such banks, it's not good. We want more efficient banks," she told News18, adding that if there have to be more government-run banks, they have to be more like the State Bank of India to meet the needs of the economy.
In her budget speech, the finance minister had announced that the government would privatise two public sector banks as well as one general insurance company, although the names of the companies were not divulged.
The privatisation of two public sector banks comes as part of the consolidation in the banking sector, as the government refocuses on its disinvestment target to raise money for spending after failing to meet its targets last year. Sitharaman has also announced Rs 20,000 crore recapitalisation of PSU banks.
Banking sources say that big banks such as SBI or PNB will not be touched and it is the smaller and middle-level banks are likely to be privatised by the government.
The Budget proposals for 2021-22 on Monday put Rs 1.75 lakh crore as a target from stake sale in public sector companies and financial institutions. Sitharaman said the government aims at making use of disinvestment proceeds to finance various social sector and developmental programmes besides infusing private capital, technology and best management practices.