Nirmala Sitharaman Defends Bank Privatisation, Assures Financial Inclusion Will Not Be Affected

Finance Minister Nirmala Sitharaman has strongly defended the government’s move towards the privatisation of public sector banks (PSBs), asserting that it is unlikely to hurt financial inclusion or the national interest.

Addressing students at the Diamond Jubilee Valedictory Lecture at the Delhi School of Economics, University of Delhi, on Tuesday, Sitharaman said the nationalisation of banks in 1969 did not fully achieve its objectives related to financial inclusion despite expanding priority sector lending and supporting government schemes. She explained, “Nationalisation did help in pushing government schemes and priority sector credit, but the system became unprofessional under state control.” She further asserted that after banks were professionalised, the same objectives were being "beautifully achieved" under more autonomy.

Sitharaman reacted to concerns that privatisation could dilute social and financial inclusion goals by stating, “This perception that when you make them professional or privatise them, the goal of reaching banking services to everyone will be lost, is incorrect.” She highlighted that allowing banks to operate professionally with board-driven decisions enables them to meet both national and commercial objectives effectively.

Reflecting on challenges faced by PSBs, Sitharaman referred to the “twin balance sheet problem” from 2012–13, which took years to resolve following the government’s interventions. She expressed confidence that Indian banks now stand exemplary in terms of asset quality, net interest margin, credit and deposit growth, and financial inclusion.

However, the finance minister’s remarks were met with criticism from bank unions, who argued that public sector banks remain central to mass banking in India, particularly in opening zero balance Jan Dhan accounts and promoting financial inclusion. The unions insisted that PSBs are vital for national interests and called for capital support and modernisation instead of privatisation.

Sitharaman's comments come amid ongoing efforts to professionalise and privatise certain PSBs as part of broader government reforms in the banking sector aimed at enhancing efficiency and fiscal health.