Big-bang privatisation of PSUs can be harmful, says RBI article

The study has found that labour cost efficiency is higher in PSBs in comparison to private banks

A gradual approach to privatise public sector banks (PSBs) is more ideal than taking a big-bang approach, a study by Reserve Bank of India (RBI) staff has concluded.
 

It has backed the government’s idea to privatise two PSBs initially. Such a gradual approach would ensure that large-scale privatisation does not create a void in fulfilling important social objectives of financial inclusion and monetary transmission, the study has argued.
 

“…a big-bang approach of privatisation of these banks may do more harm than good,” the study said.
 

PSBs, unlike the private sector banks, are not entirely guided by the profit maximisation goal.