<p>The 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.<br /><br />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.<br /><br />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.<br /><br />“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.<br /><br />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.<br /><br />Finance Minister Arun Jaitley, after the Cabinet decision last week, had said that the government has not set any target for consolidation.<br /><br />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.</p>
<p>The 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.<br /><br />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.<br /><br />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.<br /><br />“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.<br /><br />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.<br /><br />Finance Minister Arun Jaitley, after the Cabinet decision last week, had said that the government has not set any target for consolidation.<br /><br />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.</p>