Syndicate Bank may be a candidate for merger

As part of financial inclusion plan and broad-basing the banking services in the country, the government is considering merging some of the weak banks.

Syndicate Bank, which was recently in news, although for wrong reasons, could be one of the candidates for take over, a top government official said.

SBI Capital Markets, which is tasked to study the mergers and recapitalisation, is expected to give a presentation to the top finance ministry officials next week on who could be the possible candidates to come together and form a large entity.

Although the government is yet to receive any formal proposal with regard to bank mergers, the Bombay-based United Bank of India, Dena Bank and Bangalore-based Syndicate Bank make a case for losing their individual entity.

“UBI is a weak bank. There a list of another weak banks too. Syndicate Bank could be another. There is Dena Bank also. They need to be merged but we still do not know who could be the possible candidate for take over,” the official told Deccan Herald.

The consolidation will be based on geography, information technology systems and business-mix. The human angle will also have to be looked at before deciding on mergers,” the official said.

“The focus is on creating two to three global sized banks, in terms of assets, services and geographical reach which can cater to the growing needs of Indian people,” he said.

SBI has assets of around Rs 16 lakh crore, which is not very large in global terms. The RBI too has spoken in favour of mergers provided competition, banking stability and the core objective of financial inclusion were not compromised.

Analysts are of the opinion that merger of small banks can also provide a possible solution to their capital requirement to meet Basel III norms. It can solve the frequent need for bank recapitalisation at a time when the government’s focus is on fiscal consolidation.

According to RBI, state-run banks will need about Rs 4.15 lakh crore to meet Basel-III norms.

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