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‘Purely Profit-Driven Motives Against Common People’ Unions Slam PSB Disinvestment Plan
The union government plans to raise ₹45,000 crore in FY25 by reducing its stake in Public Sector Banks through Qualified Institutional Placement. While aimed at boosting capital, the move has sparked opposition from bank unions concerned about the impact on inclusive and developmental banking.
Author: Kalyani Mali
Published: July 10, 2025
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In a significant development for the banking sector, the Government of India is preparing to reduce its equity stake in Public Sector Banks (PSBs) through the Qualified Institutional Placement (QIP) route. This strategic disinvestment is aimed at raising ₹45,000 crore in the financial year 2025. While the move is positioned as a means to strengthen the capital base of PSBs without altering their management control, it has evoked sharp responses from union that fear long-term implications on the public banking ecosystem.
Government's Disinvestment Plan via QIP
As reported, the government will explore QIP as a method to dilute its holding in some leading Public Sector Banks while ensuring it retains a majority stake. QIP allows fundraising from institutional investors with fewer regulatory requirements compared to public offerings. The proposed ₹45,000 crore disinvestment is aimed at boosting capital for PSBs without altering management control.
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Record Profits of PSBs in FY 2024–25
According to the Bank of Maharashtra Officers’ Organisation (BOMOO), Public Sector Banks collectively reported a record net profit of ₹1.78 lakh crore in FY 2024–25 — marking a 26% increase over the previous year. The union attributed this performance to sustained banking sector reforms, improved operational efficiencies, and strong asset quality, noting that Net Non-Performing Assets (NPA) dropped to 0.52%. BOMOO highlighted this data to emphasise that PSBs are financially sound and well-managed institutions.
Bank Union Voices Concern
BOMOO has voiced firm opposition to the government’s decision. Speaking on behalf of the union, General Secretary Santosh K. Gadade issued a statement outlining the union’s reservations regarding the QIP move. He told Kanal, “We strongly oppose the proposed move by the Government to reduce its stake in PSBs through QIP. This step goes against the larger interest of the common people, small borrowers, farmers and MSMEs — all of whom rely on PSBs for accessible, affordable, and inclusive banking.”
The union emphasised that “PSBs are not merely commercial institutions — they are instruments of nation-building. Diluting their public character risks undermining their commitment to developmental banking and inclusive growth.”
Key Concerns Raised by BOMOO
BOMOO highlighted the following critical issues with the proposed disinvestment:
Social Mandate of PSBs: PSBs are mandated to serve regions where private banks often lack presence, especially rural and backward areas.
Role in Welfare Delivery: PSBs enable the last-mile delivery of financial benefits under government schemes, benefiting the most vulnerable segments.
Risk of Commercialisation: Disinvestment could result in a shift from social banking to profit-centric banking, undermining national development objectives.
BEFI Opposes Disinvestment
The Bank Employees Federation of India (BEFI) has also reiterated its strong opposition to any move toward disinvestment in public sector banks. C.P. Krishnan, BEFI Tamil Nadu Vice President, told Kanal, “Any move of disinvestment is being opposed by BEFI. The policy of disinvestment should be reversed to uphold complete government ownership, which was the original purpose behind the nationalisation of banks.”
Citing repeated frauds in NBFCs and private banks such as Yes Bank, ICICI, IL&FS, and Lakshmi Vilas Bank, he argued that private institutions have shown irresponsibility in managing public funds and primarily cater to elite customers. BEFI has called for the nationalisation of all private sector banks, echoing the transformative actions taken in 1969 and 1980.
While the government’s move is intended to mobilise capital without relinquishing management control, concerns have been raised about its potential impact on the public character and developmental role of PSBs.
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