The Government of India is slowly and strategically moving towards the privatisation of public sector banks. It appears that even if these banks are not fully privatised, the government may still sell a significant portion of its stake to private entities. Once a 49% stake is sold, the functioning of public sector banks will likely become similar to that of private banks, even if the government continues to hold the remaining 51%.
In this article, we will have a look at how the government is slowly and smartly privatising PSU Banks.
First, the Government announced to reduce its stake in banks citing the new SEBI guideline which stipulates that government shareholding (promoter’s shareholding) should not be more than 75%. The rule called the Minimum Public Shareholding (MPS), states that a listed company must have at least 25 % of its equity held by the public (non-promoter shareholders). So, this way the shareholding of Government will gradually fall to 75%.
Second, public sector banks are now hiring candidates from the private sector for top positions such as Regional Head and Zonal Head. These posts were earlier filled only through internal promotions, but now private candidates are being selected for these senior roles.
This will surely bring a private-sector work culture into public sector banks. Not only for senior positions, but many banks are also recruiting employees on a contractual basis. As a result, regular vacancies are being released less frequently. Most of these contractual recruitments are being carried out by Bank of Baroda and the State Bank of India.
Third, banks have introduced a new transfer policy under which employees are transferred outside their zone (state) after a fixed period of service, usually around seven years. In some banks, the tenure duration may vary — five years, six years, or another term. According to industry reports, this policy has had a significant impact on the strength of bank unions. Many union members have been transferred to other states, thereby weakening the unions. Once unions become weak, the government and bank management can implement their decisions without much opposition.
Fourth, public sector banks are now raising funds from the market, and each time they do so, the government’s stake in these banks decreases. It appears that the government has decided not to inject fresh capital into banks anymore, instead directing them to raise funds independently from the markets. With every reduction in the government’s stake, the fear of privatisation grows stronger.
The government has outlined a comprehensive strategy to raise capital and dilute its holdings in public sector banks (PSBs) during the financial year 2025–26, targeting around ₹45,000 crore through Qualified Institutional Placements (QIPs). Recently, the State Bank of India (SBI) raised ₹25,000 crore, while other banks such as Union Bank of India, Canara Bank, Indian Overseas Bank, and Bank of India have also announced plans to raise funds from the market.
Fifth, according to media reports, the government is planning to allow foreign institutions to invest up to 49% in public sector banks. This move is aimed at reducing the government’s stake more easily. At present, Indian companies and institutions are unable to invest the required funds in banks, so the government is reportedly looking towards foreign investors.
Once private and foreign entities acquire a 49% stake in PSU banks, it would, in effect, mean privatisation. Even if the government retains 51%, its decisions could still be influenced by these private entities, leading to a decline in the traditional government culture and policies within banks.
These reports and incidents clearly highlight that Banks are moving towards Privatisation. More details will be released soon.
What if the problem if the government stake is reduced? The current generation banker is not acquainted with the struggle, the agony,and the sufferings the pre-nationalised banker went through. Even otherwise we should not expect any agitating or protesting nature from the current banker who hails from a capsule family . He has never seen anything like sharing or caring in his family as such and always been demanding. So agitation and struggle will continue in social media only for some period of time before the current generation succumb to the situation and the leadership should understand this and take a serious note of this as well . Everybody is busy in discharging his/her responsibility through social media only.
And one is in a fools paradise, if, he thinks that the government is not aware of all these happenings.
The concept of union and unity is a new chapter for the current banker, he has no idea of the concept of union. If a survey is done about this the picture will be clear. You simply ask a banker which union he is a member of . The banker will tell either CHV or name some other leader as such. This generation of banker and the leadership is not interested about the struggle and the history of working class. As a result survival will be the toughest job in the near future. And again the current banker and the leadership is either not aware of the forthcoming situation of the banking scenario or are puting a blind eye to it.
Finally again I would stress what if the government stake is divulged in banks ? The good banker may get a better chance to flourish, even otherwise a good worker is always paid for be it a government or a private sector organisation. The leadership(union) should find out a way of their survival, because management now a days is directly reaching to the working class instead of approaching through the unions.
Regards