Former NITI Aayog vice chairman Arvind Panagariya has asked the government to start the privatisation of public sector undertakings (PSUs) and public sector banks (PSBs). According to Panagariya, the privatisation drive should continue despite geopolitical uncertainties and the ongoing crisis in West Asia.
In an interview with PTI, Panagariya said, “I firmly believe that, regardless of fiscal pressures, the privatisation of PSUs and most public sector banks is integral to our economic reforms.”
He also backed the creation of an independent privatisation ministry, saying the current Department of Disinvestment has not been able to sustain the pace of privatisation.
“Modernisation of the economy as a part of our India@2047 movement, we need to resuscitate the PSU and PSB privatisation,” he said.
Panagariya pointed to rising gross foreign direct investment (FDI), which increased from USD 71.3 billion in FY24 to USD 80.6 billion in FY25 and USD 94.5 billion in FY26. Panagariya also said that Indian companies have stepped up investments abroad. “If this is a short-term phenomenon, we have nothing to worry about regarding outflows. If it is a long-term trend, it is an excellent development.
The Government of India had also announced the privatisation of 2 public sector banks, but till now, no such announcement has been made. The Privatisation of IDBI Bank could also not be carried out due to low bids received from buyers.
Privatisation of Public Sector Banks (PSU Banks) may not be a good option for India at present because a large part of the country’s population still lives in rural and semi-urban areas. PSU banks play a crucial role in providing banking services in villages and remote regions where private banks often have limited presence. These banks help implement government welfare schemes, provide agricultural loans, support small businesses, and promote financial inclusion among weaker sections of society.
Private banks generally focus on profitability and may not find it financially viable to operate branches in remote rural areas. If PSU banks are privatized, there is a concern that banking services in many villages could be reduced, making it difficult for rural citizens to access loans, savings accounts, and other essential financial services.
PSU banks have also played an important role in opening Jan Dhan accounts, disbursing Direct Benefit Transfers (DBT), supporting farmers through agricultural credit, and extending banking facilities to underserved regions. Therefore, many experts believe that while reforms and improved efficiency are necessary, complete privatization of PSU banks may not be in the best interest of a country where a significant population still depends on public banking services.
