Budget 2021: Will it bring revolutionary changes into banking and financial sector?

The finance minister has called for a one-in-a-100-year budget. So can it bring some revolutionary changes into the banking and financial sector? Now one of the cobwebs in the banking sector is the legacy of nationalised banks.

One of the expectation is to reduce number of public sector banks from 12 to 4. It’s already reduced from 27 to 12 through mergers.

Speaking in an interview to CNBC-TV18, Ananth Narayan, Professor at SP Jain Institute of Management and Research (SPJIMR), said, “Focusing only on consolidation in the budget will be a disappointment.”

According to him, public sector banks (PSBs) require a lot of changes in terms of operational freedom, among other things.

“Operational freedom is one point; governance reform is required across the eco-system whether it’s NBFCs, private sector banks or public sector banks,” said Narayan.

Meanwhile, NS Vishwanathan, former Deputy Governor of Reserve Bank of India (RBI), said, “I have been an advocate for consolidation in the public sector banking space.”

“The challenge in doing merge would be to how to do with different co-banking solution platforms, but it’s less of a problem for me but the inefficiencies of large number of institutions of the same owners competing among themselves for the same pie is lot more problematic. So, we should look at more consolidation; it can also be interspersed with maybe privatization of one or two,” he said.

For entire discussion, watch the video