The Government of India recently granted operational autonomy to the PSBs. This move is the first step and a lot more remains to be done to make these banks truly independent. In a move to carry forward the banking reforms, the Government of India recently granted operational autonomy to the Public Sector Banks (PSBs). It has been a long awaited move. The phrase `operational autonomy' has often been used in the context of the PSBs ever since the Narsimham Committee report was made public.

Under the autonomy package, PSBs are now allowed to acquire any company, NBFC or even their private sector competitors. They also have the autonomy to enter any business which offers a greater potential for growth. However, these business areas are yet to be defined by the Banking Nationalization Act. Also, without taking the special permission from the government they can exit from any business areas. In addition, PSBs will have the autonomy to close or merge unviable branches, open overseas offices and set up subsidiaries.

The boards of public sector banks will enjoy the freedom to carry out their functions without government influence. But this will be subject to statutory requirements, government policies and regulatory guidelines issued by RBI from time to time. Recognizing the effect of globalization on Indian banks and the tendency of the banks to expand abroad and even raise capital abroad, PSB officials will be free to visit foreign countries to interact with investors, depositors and other stakeholders. Earlier, any such travel had to be pre-authorized by the government as it involved the outflow of foreign exchange.

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