Privatization of Indian Banks

The Government aims to recapitalize the PSU banks, while periodically hinting towards Privatization. In the longer run, the later shall be much more beneficial for the economic reforms in the country. Firstly, we have to acknowledge the Banking Reforms since 1969, when then Government decided to nationalize the largest 14 banks in this country, with the vision to provide banking and financial services to the masses, especially in rural areas. This system was broken and inefficient, and it did not fulfil its objectives. Secondly, due to lack of competition and innovation, the sector remained underdeveloped and under-utilized. It was not before the surging competitive advantage of the private players such as ICICI that the banking sector finally evolved. Investing up to10% of GDP in recapitalization may lead to growths in the shorter run, but capitalization is the way forward, as it shall also lead to better policy reforms and overall growth