The severe pandemic situation in the country has accelerated the need to privatize commercial banking institutions and public sector commercial banking institutions to garner better credit opportunities and realize the goal of becoming a self-dependent, leveraging and liquidating commercial banking body thereby developing the institutional credit mechanism and enhancing the growth of credit opportunities in the country. This need has been accelerated through the financial system existing in the country as it has helped in borrowing mechanisms and has also introduced investment parameters that would help in bringing about liquidity in the financial parameters of the country and thereby improve the functioning of the credit system.
CARE Ratings, a Research wing of the Indian Financial System and one of the top Financial Analysis firms in the country along with Motilal Oswal has predicted that if the Government of India reduces its stake held jointly in the Bank of India and the Indian Overseas Bank, then it can cumulatively raise a record 28,600 crore credit amount in the financial year. Currently, the government holds a stake of 98.5% and 92.5% in the aforementioned banking institutions respectively. However, through careful analysis, it has been identified that if the banking if the Government of India reduces its stake to 51% in both the aforementioned banking institutions then it can create a credit exchequer of 12,800 crores and 6,400 crores respectively thereby ensuring that the banking institutions privatization move work towards leveraging the necessary credit facilities in the economy. Moreover, the Government of India has a similar stake percentage in holding banking institutions like the Bank of Maharashtra and Central Bank, liquidating whose stakes would further yield a requisite amount that can be added to the existing stake appraisal process of the Government.
Thus, this theory however difficult in practice would fetch a productive result for the Government of India and would therefore be crucial in the sustenance of the Indian Financial System.