Private banks can now be equal partners in development of the Indian economy, said finance minister Nirmala Sitharaman
The Centre has lifted the restrictions on grant of government businesses to private banks, finance minister Nirmala Sitharaman announced on Wednesday. "Embargo lifted on grant of govt business to private banks. All banks can now participate," finance minister posted on Twitter.
She further mentioned that all banks can now be equal partners in development of the Indian economy. "Private banks can now be equal partners in development of the Indian economy, furthering Govt's social sector initiatives, and enhancing customer convenience," Sitharaman said in a tweet. Only a few private banks including Axis Bank earlier permitted to take part in the government businesses.
Commenting on the move, Uday Kotak, chief executive officer, Kotak Mahindra Bank said, "I welcome this progressive reform. It will enable the banking sector to serve customers better. Private and public sector must both work towards sustainable development of India."
The private banks are allowed to conduct banking transaction related to the government such as taxes and other revenue payment, facilities, pension payments, small savings scheme, etc. This move is expected to enhance customer convenience, spur competition and high efficiency in the standards of customer sevices, the department of financial services said in a statement.
"The Centre’s move to lift the restrictions on grant of Government business to private banks is a huge boost not just to the private banks but to the overall development of the country. Private banks have been faster in bracing and internalising newer technology and systems and this move will allow those processes to be efficiently used for Government spends and projects," said Anish Mashruwala, Partner, J Sagar Associates."This has to be hailed as a welcome move as it not only levels the playing field but it shows that the government is mindful of balancing the need for overall development that technology used by private banks can offer which are hampered by the bye gone protectionist approach. Needless to say it augurs the Centre’s push towards a digital economy," he further mentioned.
There will be no bar on Reserve Bank of India (RBI) for authorisation of private banks for government businesses, including government agency businesses, the statement from the department of financial services added. The Centre has already conveyed its decision to RBI, it mentioned.
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