Government Set to Push Comprehensive Banking Sector Reforms

The government plans to introduce amendments to the Banking Regulation Act, 1949, and other laws, aiming to privatize public sector banks and enhance investor protection. These amendments will be discussed during the upcoming Budget session beginning July 22. The amendments are critical for reducing government ownership in state-owned banks below 51%.

The government is poised to introduce substantial amendments to the Banking Regulation Act, 1949, along with other pertinent laws during the upcoming Budget session. These reforms are geared towards accelerating the privatization of public sector banks and bolstering investor protection as well as bank governance.

Crucial amendments to the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 are also on the table to facilitate this privatization. If approved by Parliament, these legislative changes will allow the government to reduce its holding in state-owned banks to below 51%. This move follows a series of consolidations that reduced the number of public sector banks from 27 in March 2017 to 12.

Finance Minister Nirmala Sitharaman initially announced the privatization plans for two public sector banks and one general insurance company during her Budget presentation for 2021-22. The Parliament session, beginning on July 22, will conclude on August 12 after the passage of the Finance Bill.