The permission for new pvt banks to participate in the govt biz is based on the RBI guidelines: FM


Finance Minister Nirmala Sitharaman said in parliament on Tuesday that new private banks will be allowed to conduct government-related business, in accordance with RBI guidelines. Sitharaman said during Question Time in the Rajya Sabha that the government had now “only hinted” to the RBI that other private banks could do government-related business in order to ensure a level playing field.

“Now we are following the existing standards, on the basis of which several banks have been given permission to do business. So these rules according to the RBI guidelines will be applied to newer banks and new private banks that contact the RBI, ”she said.

The RBI, as the regulator, has established standards and these standards will apply to the new banks, she added.

The minister responded to a question about whether the government would adopt criteria to allow new banks to do government-related business.

In response to another request from Shiv Sena leader Anil Desai that if public sector banks were to be weakened by allowing private banks to conduct government-related business, Sitharaman said that some private banks and all public sector banks would do so.

“Some private bank customers are already benefiting from such services. The attempt now is to level the playing field. Some private banks are already doing it, all public banks are doing it, why not expand to all private banks so everyone gets equal opportunities,” she said.

This is happening because business is growing and a lot more citizens are turning to banks. As pointed out, the deal needs to be extended to all customers, she said.

Minister of State for Finance Anurag Singh Thakur said banks do two types of business. One is the Agency Commission, which conducts revenue and payments on behalf of the central and state governments and pension payments in relation to the center and state governments or other items recommended by the RBI.

On the other hand, certain items fall under the work that does not have an agency commission but that has to be done by the bank, such as providing the bank guarantees and banking, etc.

Thakur said that the share of private banks in the banking sector had increased, Thakur said that private bank deposits rose from 12.63 percent in 2000 to 30.35 percent now. The advances have also risen from just 12.56 percent to 36 percent.

That said, the private sector’s share of the priority sector’s lending is increasing. The private banks have granted loans of Rs 12.72 lakh crore, which is nearly 50 percent of the sector’s senior lending.

During the COVID period, the participation of private banks in the state emergency credit line guarantee program increased.

Under the system, the cumulative sanction of public banks was Rs 95,261 billion, which is 38.22 percent of total lending. On the other hand, private sector bank lending totaled Rs.128,297 billion, which was 51.5 percent of the lending of the Emergency Loan Guarantee System. This clearly shows that lending has increased and their participation is greater, he said.

Hence, the decision was made to allow private banks to do government-related business in order to improve consumers, do business and make life easier, he said, adding that this will improve the customer experience, enable innovation and the latest technology Business and MSMEs.

“It will also stimulate competition for greater efficiency,” added the minister.


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