The Government of India has decided to privatize more the 60% of the banks owned by the Government. Public Sector Banks have been under tremendous pressure and require urgent raising of capital. But the Government has its hands full the economic conditions caused due to the Covid-19 pandemic. The plan of the Government is make these public sector banks into private banks. First, the Government plans on selling majority shares and stakes of banks such as Bank of India, Central Bank of India, UCO Bank, Indian Overseas Bank, Bank of Maharashtra and Punjab & Sind Bank to private entities.

At present there are 12 public sector banks and the Government plans on reducing it to just 5. With current on-going pandemic, the economy across the world is under tremendous strain. Due to such economic conditions, Government of India had announced loan moratorium to all the loan takers. This has led to capital issues amongst the banks. Private sector banks have plans to raise capitals whereas the public sector banks rely on the Government for capital. Private Sector Banks have a better value for their shares and bonds as compared to Public Sector Banks in the market. Funding and raising capital for a dozen banks is not an easy task especially when the entire nation had stopped working for a big amount of time. Thus to relieve the pressure of the Government, the Government came up with this plan.

Several Government committees along with the Reserve Bank of India (RBI) had suggested this plan on several occasions that the Government should not have any more than 5 public sector banks and this will now be implemented by the Government in the coming few months. Government may as well sell the unmerged banks to the private sectors firms in order to take the public sector banks off its hands.