SBI Recommends Selling Govt Banks To Private Companies Because They Are In 'Good Condition'


Sheetal Bhalerao

Sheetal Bhalerao

Jul 09, 2024


In its research report on Monday, SBI said that the government should go ahead with disinvestment of public sector banks (PSBs) as they are in good condition.

SBI Recommends Selling Govt Banks To Private Companies Because They Are In 'Good Condition'

Government Should Go Shead With Disinvestment of PSBs

This report also pitched the consolidation of existing government-owned banks.

Further, the report titled ‘Prelude to Union Budget 2024-25’  mentions, “As banks are in good condition, the government should take stance on disinvestment of PSBs.” 

The report said that the government and Life Insurance Corporation of India are selling an almost 61 percent stake in the lender, while talking about privatization of IDBI Bank.

Adding,“They invited bids from buyers in October 2022. In January 2023, the Department of Investment and Public Asset Management (DIPAM) received several expressions of interest for the IDBI Bank stake on offer. We expect the government to clarify this in the Budget.” 

The government owns over 45 percent stake in IDBI Bank, and LIC has a 49.24 per cent shareholding currently.

Unleash Additional Spending and Thereby, More GST Revenue

This report recommends that the government should tweak the tax on deposit interest and make flat tax treatment across the maturity ladder in line with mutual fund and equity markets.

It further adds, “Household net financial savings has declined to 5.3 percent of GDP in FY23 and is expected to be 5.4 per cent in FY24. If we make the deposit rate attractive in line with MFs, then this could push up household financial savings and CASA.” 

This could unleash additional spending and thereby, more GST revenue to the government as this amount will be in the hands of depositors, as per the report.

Adding,“Increase in bank deposits will bring not only stability in core deposit base and financial system but also financial stability in household savings as the banking system is better regulated and has superior trust as compared to other alternatives with high volatility/risk.” 

Deposits are taxed on an accrual basis and other asset classes only on redemption and there is also a need to remove this treatment, it added.

The report by the Economic Research Department, State Bank of India (SBI), expressed expectation that the government will look into the concerns over the Insolvency and Bankruptcy Code (IBC) that must be improved and expediting cases under the IBC should be a key change.


Sheetal Bhalerao
Sheetal Bhalerao
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