Question

The Government of India has been emphasizing on limiting the number of public sector banks and creating greater scope for the expansion of the private sector commercial banks. Give three positive aspects and two negative aspects of such a policy.

Answer 1

Three positive aspects of such a policy are:

1) More public sector banks had given monopoly to the government in the banking industry. As in case of any monopoly situation, the quality of service went down and the people suffered.

2)Privatization of banks enhances efficiency and productivity through proper management and control.

3) The private sector and foreign banks can resist local government pressure to lend to favored sectors.

Two negative aspects of such a policy are:

1)Privatization of banks opens the way for the domination of the economy by foreign capital.
2:Privatization of banks would remove a large chunk of the economy from the purview of public scrutiny and hence from the realm of social accountability.