The Centre has lifted the restrictions on grant of government businesses to private banks, finance minister Nirmala Sitharaman announced on Wednesday. “Embargo lifted on grant of govt business to private banks. All banks can now participate,” finance minister posted on Twitter.
She further mentioned that all banks can now be equal partners in development of the Indian economy. “Private banks can now be equal partners in development of the Indian economy, furthering Govt’s social sector initiatives, and enhancing customer convenience,” Sitharaman said in a tweet. Only a few private banks including Axis Bank earlier permitted to take part in the government businesses.
Commenting on the move, Uday Kotak, chief executive officer, Kotak Mahindra Bank said, “I welcome this progressive reform. It will enable the banking sector to serve customers better. Private and public sector must both work towards sustainable development of India.”
“Axis Bank has a deep relationship with various central and state governments. We at Axis Bank are delighted with the announcement,” Rajiv Anand, executive director – Wholesale Banking, Axis Bank said.
The private banks are allowed to conduct banking transaction related to the government such as taxes and other revenue payment, facilities, pension payments, small savings scheme, etc. This move is expected to enhance customer convenience, spur competition and high efficiency in the standards of customer sevices, the department of financial services said in a statement.
“The Centre’s move to lift the restrictions on grant of government business to private banks is a huge boost not just to the private banks but to the overall development of the country. Private banks have been faster in bracing and internalising newer technology and systems and this move will allow those processes to be efficiently used for Government spends and projects,” said Anish Mashruwala, Partner, J Sagar Associates.
“Innovation from the private banks has changed the face of banking for the middle classes. If the government can now tap into these banks to solve problems for the bottom of the pyramid – we could be unleashing a tsunami of solutions for the underserved,” said Mathew Chacko, partner, Spice Route Legal.
There will be no bar on Reserve Bank of India (RBI) for authorisation of private banks for government businesses, including government agency businesses, the statement from the department of financial services added. The Centre has already conveyed its decision to RBI, it mentioned.