Arvind Panagariya Invites the Government to Revive PSU and PSB Privatization Attempts in 2026

Arvind Panagariya compelled the Center, for the first time in a long time, to continue the privatization of PSUs and banks to reinstate the stalled reforms. 

Key Highlights

• In a PTI interview published on June 15, 2026, Panagariya advocated selling several PSUs and the majority of PSBs.
   
• The Center aimed to privatize 2 PSBs in 2021, although the privatization of big banks has progressed slowly since then.

Arvind Panagariya, the former Vice Chairman of NITI Aayog, advocated the Union government to recommence the privatization of public sector undertakings and the majority of public sector banks. His comments on the issue appeared in Business Standard on June 15, 2026, following an interview to PTI.

The timing has drawn attention. Public sector banks are no longer in the weak position seen during the bad-loan crisis. They now report stronger profits, lower NPAs and better capital levels. That can help the government seek a better price. It can also raise a basic question: should profitable banks be sold when they are already giving the Centre steady dividend income?

What Do The Latest PSB Numbers Show?

The Finance Ministry published these figures through the PIB report on May 12, 2026.

Over the year, net profit rose by 11.1%. Deposits grew by 10.6% and advances by 15.7%. Retail loans grew by 18.1%, as did agricultural loans. MSME loans grew by 18.2%. PSBs also recovered ₹86,971 crore and raised ₹50,551 crore in capital.

These are not small changes. They show why the ownership debate is different now from what it was a few years ago.

How Could Privatisation Affect Indian Bank Customers?

For customers, ownership changes are felt through everyday banking. A private buyer may close weak branches, raise some service charges or move more work online. Loan approvals may become quicker in profitable segments. Rural and low-income customers could face a different experience.

A pensioner in a small town may care less about faster apps and more about keeping a branch nearby. A small shop owner may depend on regular contact with a bank manager. Farmers and MSMEs also rely heavily on priority-sector credit. Any sale agreement would need firm conditions on these areas before management control changes hands.

What Caused The Stagnation Of The Earlier Privatisation Programme?

NITI Aayog began preparing a list of probable privatisation candidates in the year 2016. In addition to IDBI Bank, the Union Budget of 1st February 2021 mentioned the sale of 2 PSBs and 1 General Insurance Company, as per PIB.

The flow of government receipts also explains why selling profitable assets is not a simple decision.

Dividend receipts were about 4.6 times the money collected through disinvestment. A sale gives the government cash once. Retaining a profitable bank can keep dividend income flowing year after year.

A LoansJagat report published on April 30, 2026, looked at the proposed 60.72% IDBI Bank stake sale and the reported ₹72,000 crore involved. It also highlighted pricing, pension costs and management control as hurdles in the transaction.

What Recommendations Did Panagariya Make?

According to Panagariya, the West Asia crisis, fiscal problems, and geopolitical tensions should not continue to delay the privatization program. He recommended that the government create a separate ministry for privatization, claiming that the pace of privatisation in India was unacceptably slow.

Gradual privatization would be better for public sector bank customers. The government should publish methods of privatization, require certain conditions to be met by prospective bank buyers, and provide safeguards for bank customers.

Conclusion

The Centre now has to weigh a one-time sale price against recurring dividends and public banking duties. Any fresh privatisation push will need fair valuation, rural branch protection and firm rules for depositors and borrowers.

Frequently Asked Questions

Has There Been Any Government Announcement Regarding The PSB Privatization Policy?

No, Panagariya made the recommendations on June 15, 2026.

What was the Target of PSB Privatization in 2021?

The Union Budget proposed the sale of 2 public sector banks.

Are Public Sector Banks Profitable Now?

Yes. Their combined net profit reached ₹1.98 lakh crore in FY 2025-26.

What are the advantages and risks of privatising Indian banks?

Privatisation may improve efficiency and technology but could reduce rural access, jobs and affordable lending.

Will PSU Privatisation Benefit India’s Economy in the Long Run or Create New Risks?

It may improve efficiency and investment, but weak safeguards could hurt jobs, access and public accountability.