Private sector banks are readying themselves to undertake government business, expecting that they will be allowed to do so from April 1. The bankers are awaiting a notification having finer points regarding the announcement by the month-end.

According to a bank executive, starting from the next month, at the start of the fiscal year, it is expected that the private banks will be able to start doing government business, adding that a notification and working guidelines will be issued this month. On February 24, Finance Minister Nirmala Sitharaman declared the upliftment of the embargo on the grant of government business to the private banks. Currently, apart from the public sector banks, only the three large private sector banks are permitted to do government business like deposits, public provident fund, Sukanya Samriddhi accounts, tax payments, and pension payments, among other initiatives. Many private-sector lenders are also willing to take up more responsibilities in the priority sector believing that their focus on digital channels and technology will give them an added advantage. The banker told that there will be better efficiency and faster service, and could even push some of the public sector banks to improve.

According to a recent report made by Kotak Institutional Equities, apart from the large private banks which are likely to be the prime beneficiaries, some regional banks such as Federal Bank or Bandhan Bank, may also gain an advantage. However, the report stated that access to deposits can be a source of advantage, particularly for banks relying on wholesale deposits, but building these revenue streams is time-consuming, moreover, the margins are also considerably thin.