JOIN USThe Finance Ministry is open to providing capital support for facilitating consolidation among state-owned banks, which are reeling under mounting bad loans, official sources said.
The Union Cabinet has approved the setting up of an alternative mechanism, or a panel of ministers, to decide on consolidation proposals for state-run banks.
On receiving a proposal from stressed banks, if the ministerial panel finds that the merger is going to create a strong bank, it will not let it go for want of fund shortage, the sources said, adding that acquisition will come at a cost.
“First, the merger proposal should come from the board,” said a source, adding, “If the alternative mechanism finds the match viable, the Finance Ministry could provide capital support to the acquiring bank if there is a shortfall,” he said.
Sources said the government is keen that at least one merger proposal reaches a logical conclusion by the end of the current fiscal, which is next March-end.
Finance Minister Arun Jaitley, after the Cabinet decision last week, had said that the government has not set any target for consolidation.
There are now 20 PSBs other than SBI, which are grappling with Rs 6 lakh crore worth of NPAs or bad loans, which is about 75% of the total distress.