As India prepares for the Union Budget 2024, the future of public sector banks (PSBs) hangs in the balance amid reports advocating disinvestment of government shares. While the SBI has recommended disinvestment, experts suggest the government may prioritize other areas in the upcoming budget, potentially postponing any major disinvestment plans to the following financial year.
Private and public sector banks will observe a holiday on May 23, 2024, in 18 states across India on account of Buddha Purnima. The holiday falls in line with the Reserve Bank of India’s (RBI) holiday list. However, digital banking services will remain accessible in these states despite the physical branches being closed.
The Reserve Bank of India (RBI) is expected to transfer a dividend to the Central government in FY25 that is in the same range or slightly more than the last fiscal (FY24). The Centre is also expected to receive a higher dividend from public sector banks (PSBs) in FY2025, as their profits have increased in FY24 compared to the previous year. PSBs reported profits of over 98,000 crore in the first three quarters of FY2024, which are likely to exceed 1.3 trillion by the end of the fiscal year. The dividend from the RBI is usually released to the Centre in May. During FY24, the government had pegged a 17% higher dividend at 48,000 crore from the RBI, PSBs, and financial institutions. However, this target was surpassed with the transfer of 87,416 crore as surplus to the Central government for FY2023 by the RBI, which was paid in May 2023 and accounted for in FY2024 by the government. The dividend payout from PSBs for FY24 has been around 15,000 crore.
In a landmark judgment, the Bombay High Court has ruled that the Centre’s power to issue lookout circulars (LOCs) against defaulting borrowers through public sector banks (PSBs) is unconstitutional. This decision aligns with a previous order passed by the Delhi High Court in September 2023. The Bombay HC bench, comprising Justices Gautam Patel and Madhav Jamdar, quashed all unauthorized LOCs issued by PSBs in a batch of petitions filed since 2020. The court held that such LOCs violate fundamental rights, including the right to travel abroad, which is guaranteed under Article 21 of the Constitution. The Bureau of Immigration has been directed to ignore and not act upon any LOCs issued by PSBs.
The Bombay High Court ruled that public sector banks do not have the authority to issue ‘Look Out Circulars’ (LOCs) against Indians and foreigners based on the central government’s office memoranda. The court deemed the delegation of authority to bank managers as arbitrary, while acknowledging that the memoranda themselves are not unconstitutional. The ruling clarified that this decision does not affect existing travel restrictions issued by tribunals or criminal courts.
