ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Should They Be Privatised?

Public Sector Banks in India

An examination of the main arguments extended to build a case for privatisation of the public sector banks (PSBs) in India reveals that the arguments are based on (a) perceptions rather than factual analysis; (b) the use of partial information; and (c) evidence on international experience which is not unambiguous. It can be concluded that the case for privatisation of PSBs in India is not strong enough at least on the grounds usually proposed by the advocates of privatisation. Private sector banking would have a larger probability of crisis if the supporting legal and regulatory framework were not sound enough to insulate the systems from extraneous pressures. It may, therefore, be safer to maintain the public sector character of the banks till the conditions for privatisation are conducive enough.

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