The Reserve Bank of India (RBI) has struck a note of caution on the privatisation of public sector banks (PSBs). In its monthly bulletin, the RBI said public sector banks have performed better on financial inclusion and labour cost efficiency.
The bulletin said a big bang approach to bank privatisation may not be the way forward. It also states that private sector banks are more pro-cyclical whereas public sector banks have helped in the counter-cyclical measures taken by the monetary policy committee.
The RBI also cites a number of factors that have helped pull up the balance sheets of public sector banks over the last two years, especially during COVID-19.
The RBI seems to suggest that going forward with the setting up of the National Asset Reconstruction Company Ltd (NARCL) and with National Bank for Financing Infrastructure and Development (NaBFID) also coming into existence, the road ahead for most of the public sector banks may be good.
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