All public sector banks (PSBs) should be privatised and only SBI— due to its better performance — may remain under government ownership for now, a policy paper by two influential economists has recommended.

The policy paper is to be presented at the India Policy Forum on Tuesday. It has been authored by Poonam Gupta, NCAER director general & member of the economic advisory council to the Prime Minister (PMEAC), and former Niti Aayog vice-chairman & Columbia University professor Arvind Panagariya.

“In principle, the case for privatisation we have made applies to all PSBs including SBI. But we recognise that within the Indian economic framework and political ethos, no government will want to be without a single PSB in its portfolio. Keeping this in view, the goal, whether stated explicitly or left implicit, should be to privatise all PSBs other than SBI…”

“Of course, if some years later, the circumstances turn yet more favourable to privatisation, the goalpost may be moved to include SBI in the privatisation list,” the authors argued. They said that with the bulk of banking moving into the private sector, the RBI will also feel the pressure to streamline its processes, rules, and regulations to deliver superior outcomes since the fact of three-fifths of the banking sector being outside its regulatory reach would no longer serve as an explanation for its lapses.