Government has allowed private sector banks to participate in the business of its agencies. Up until now, the business operations of government organizations were being undertaken by the public sector banks.
"Embargo lifted on grant of government business to private banks. All banks can now participate," the office of Sitharaman said in a statement issued on social media.
"Private banks can now be equal partners in development of the Indian economy, furthering government's social sector initiatives, and enhancing customer convenience," it further added.
According to a press release issued by the Department of Finance Services (DFS), the private sector banks can be involved in "conduct of government-related banking transactions such as taxes and other revenue payment facilities". “This step is expected to further enhance customer convenience, spur competition, and improve efficiency in the standards of customer services,” it added.
With the lifting of the embargo, there is no bar on RBI for the authorization of private sector banks (in addition to public sector banks) for government business, "including agency business", the DFS further added.
Industry has responded positively to the government's decision on lifting the curb on private lenders. "I welcome this progressive reform. It will enable the banking sector to serve customers better. Private and public sector must both work towards sustainable development of India," said Uday Kotak, Managing Director of Kotak Mahindra Bank.
