RBI warns the government that large scale privatization of public sector banks may do more horn than good. RBI has advised the government to proceed in this matter. The central bank said in an article, private sector banks (PVBs) are more efficient in maximizing profits.
On the other hand, public sector banks have performed better in promoting financial inclusion. According to the article, privatization is not a new concept.
Everyone knows its advantage and disadvantage privatization has traditionally been the main solution to all problems, while economic thinking has found that a cautions approach is necessary to pursue it. The government had merged 10 nationalized banks into four major banks in 2020 with this come down to 12 from 27 in 2017.
Rate of Depletion of Foreign Exchange Reserves Due To Intervention
RBI intervention has reduced the rate of depletion of resources during volatility in money market. The study of Saurabh Nath, Vikram Rajput and Gopala Krishnan of the RBI’s financial market operations department said that global Financial crisis of 2008-09 led to a $ 70 billion decline in currency reserves.
During COVID- 19, it decreases by dollar only $ 17 billon. At the same time, due to the Russia- Ukraine war, there has been a decrease of $ 56 billon till July 29 this year.
The Right Steps will have to be taken to control Inflation
RBI said that there is a need for suitable policy steps to bring high inflation under control in the coming times. Deputy Governor Michael Debabrata Patra said in the article, “The most pleasant development in the softening of inflation rate in July by 0.03% compared of June.
In the June quarter of 2022-23 , the average has decreased by 0.60%.
- It has been said in the article, if the estimates are correct, inflation will come down 7% to 5% in the first quarter of the next financial year.
- However, the risk of inflation moderated to 6.71% in July due to cheaper food items.
