Lal Bahadur Shastri Institute of Management

&Technology

Privatization of Banking in India

SHRIANKHLA SAXENA

PGDM Batch 2021-23

 Agenda
1. Introduction
2. Privatization
3. Origin
4. Meaning of Banking Privatization
5. Different forms of Privatization
6. Analysis of Banking Privatization
7. Impact on Economy
8. Need for Privatization
9. Pros of Privatization
10. Cons of Privatization
11. Conclusion
 Introduction

Privatization was introduced during the eighties by shri Rajiv Gandhi.

P.V. Narsimha Rao gave actual speed by introducing the new industrial
policy.
 PRIVATIZATION

THE TRANSFER OF OWNERSHIP , PROPERTY OR BUSINESS FROM THE

GOVERNMENT TO THE PRIVATE SECTORIS TERMED PRIVATIZATION. THE
GOVERNMENT CEASES TO BE THE OWNER OF THE ENTITY OR BUSINESS.

THE PROCESS IN WHICH A PUBLICLY-TRADED COMPANY IS TAKEN OVER

BY A FEW PEOPLE IS ALSO CALLED PRIVATIZATION.

THE STOCK OF THE COMPANY IS NO LONGER TRADED IN THE STOCK

MARKET AND THE GENERAL PUBLIC IS BARRED FROM HOLDING STAKE IN
SUCH A COMPANY.

THE COMPANY GIVES UP THE NAME “LIMITED” AND START USING

“PRIVATE LIMITED” IN ITS LAST NAME.
 Privatization” was coined in English descriptions of the
German experience in the mid-1930s.

The Thatcher government that came to power in 1979 with

privatization as a minor part of its manifesto, but it became a
central part of its ideology as the 1980s progressed.

The Nazis sold off public ownership in “

steel, mining, banking, shipyard, ship-lines, and railways.
 Meaning of banking
Privatization

When a bank is sold to a

private entity, the
Privatization of the
government gets back its There may not be any
government banks means
capital. The value of this immediate change for the
that the ownership of the
capital depends on the bank customers. But in course
banks will no longer rest with
market condition and the of time, they may get better
the government that is
inherent strength of the bank service and may also have to
government can't be holding
like number of branches, pay more charge for the
more than 50% stake in the
customers, business mix, etc. services they avail.
bank.
In any case it cannot be less
than the present market cap.
DIFFERENT FORMS OF PRIVATIZATION
Analysis of Banking Privatization
IMPACT ON ECONOMY
INCREASE IN SHARE VALUE

BETTER CUSTOMER SERVICES .

INCREASE PRODUCTIVITY OF THE EMPLOYEES.

JOB OPPORTUNITIES

COMPETITIVE RATES
ALLOW BANKS TO FOCUS ON THEIR LONG TERM GOALS WITH REDUCED GOVERNMENT
INTERFERENCE.

HELP IN CONVERTING LOSS MAKING VENTURES INTO PROFITABLEBUSINESSES.

HELP THE GOVERNMENT SAVE MONEY AND BOOST EFFICIENCY

MARKET COMPETITION.

STRENGTHENING UNDERPERFORMING BANKS.

 PROS OF PRIVATIZATION

it is found that the Private sector banks are more advanced than Public sector Banks and are
also working more efficiently.
The foreign investors prefer to invest in private sector banks rather than the public sector
banks.
The private sector banks are much strict against loans and frauds.
Public Sector banks are usually less competitive than the private sector banks.
Private sector banks are obedient and quite serious towards their work and responsibility
which lacks in the most of the Public sector banks.
The private sector banks follow the concept of lowest risk.
Privatization will also help to reduce the burden of the Government of India.
 CONS OF PRIVATIZATION
The privatized banks will focus on maximizing their benefit and it will put an adverse effect on the middle
class and poor people of the society.
Every organization , whether government sector or private sector, has some issues within its structure. It is
not necessary that a private sector bank will never go with any fraud .
The people in present India mostly believe on Public Sector Banks and don’t prefer to deposit their savings
in private sector Banks.
The public sector banks usually work on social welfare while the motive of private sector banks is
generation of profit.
Many government schemes like “Jan - Dhan Yojna ” and “Pension Yojna” worked well and also became
successful only because they were applied in Public Sector Banks.
Another disadvantage of privatization is the excess use of nepotism which will affect the banking services.
As we all know that the Banks are the backbone of the economy. The Indian Constitution
says “Every economic activity in the nation should be centered at the welfare of the people”
but, in my view, privatization will violate this concept because it is obvious that the Private
Bank will be aimed at maximizing their own profit. Where there are some bad aspects of
privatization of banks there are also some good aspects of it. We must examine on our own
and decided whether Privatization of Banks should be supported or opposed.

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