Finance Minister Nirmala Sitharaman has said that concerns about privatisation of state owned banks hurting financial inclusion or national interest are unfounded. Speaking at the Diamond Jubilee Valedictory Lecture at the Delhi School of Economics, she explained that bank nationalisation in 1969 did not fully achieve its goals, especially in terms of expanding access to banking services.
She noted that nationalisation did help promote priority sector lending and government programmes but added that government control made public sector banks less professional. Even after fifty years, she said the original objectives were not completely met. Sitharaman stated that once banks were professionalised, those objectives continued to be met effectively. She said, “So, this perception that when you try to make them professional, and if you want to privatise them, which is a Cabinet decision, that objective of reaching to all people, taking banking to everybody will be lost… is incorrect.”
The minister spoke about the earlier misuse of public sector banks, which led to serious balance sheet problems. She referred to the twin balance sheet issue first seen in 2012 and 2013 and said it took nearly six years after the new government took office to correct the damage. She said Indian banks now stand out for their asset quality, growth in credit and deposits and progress in financial inclusion. She stressed that when banks work professionally and follow board driven decisions, both national interest and banking goals are protected.
As part of the broader privatisation effort, the government sold its controlling stake in IDBI Bank to a major insurance corporation in January 2019. Later, the government and the insurer began the process of a strategic sale of their stakes. Expressions of interest were invited in October 2022, and multiple proposals were received in January 2023. In August 2025, the markets regulator approved reclassifying the insurer as a public shareholder once the strategic divestment is completed.
The government has also carried out a major consolidation of public sector banks. In 2019, several mergers were announced, reducing their total number from twenty seven in 2017 to twelve. From April 2020, a series of mergers took effect involving Punjab National Bank, Canara Bank, Indian Bank and Union Bank of India. Earlier mergers included the combination of Dena Bank and Vijaya Bank with Bank of Baroda, and before that, the integration of associate banks and Bharatiya Mahila Bank with the State Bank of India.
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