Enthused by the success of SBI merger, the finance ministry is considering clearing another such proposal in the public sector banking space by this fiscal end with a goal to create four to five global sized lenders.
Five associate banks and Bharatiya Mahila Bank became part of SBI on April 1, 2017, catapulting the country’s largest lender to among the top 50 banks in the world.
Now, the finance ministry is looking to replicate the model in the case of other state-run banks so that they reach critical mass to compete with global peers. “Consolidation is a must...but decision in this regard would be based on commercially prudent parameters. If the NPA situation gets better, there could be one more merger towards the end of this fiscal,” a senior official said.
Toxic loans of public sector banks rose by over Rs 1 lakh crore to Rs 6.06 lakh crore during April-December of 2016-17, the bulk of which came from power, steel, road infrastructure and textile sectors.
Finance Minister Arun Jaitley has on several occasions said India needs five to six banks of global size and scale and further consolidation in the banking sector will be done at the appropriate time. Whenever consolidation happens, it takes into consideration interest of all stakeholders including employees and shareholders, the official said, adding it has to be a win-win for all parties.
A balancing act has to be done before any merger is given clearance by various authorities and regulators, the official added. The future merger proposals in the banking sector will also require clearance from the Competition Commission of India (CCI) to see if the merged entity is going to create a monopoly.
In the last consolidation drive that saw the light of day in April, CCI nod was needed only in the case of merger of the Bharatiya Mahila Bank (BMB) with SBI. There was no such requirement for merger of associate banks with SBI as they were part of the parent.
Five associate banks and Bharatiya Mahila Bank became part of SBI on April 1, 2017, catapulting the country’s largest lender to among the top 50 banks in the world.
Now, the finance ministry is looking to replicate the model in the case of other state-run banks so that they reach critical mass to compete with global peers. “Consolidation is a must...but decision in this regard would be based on commercially prudent parameters. If the NPA situation gets better, there could be one more merger towards the end of this fiscal,” a senior official said.
Toxic loans of public sector banks rose by over Rs 1 lakh crore to Rs 6.06 lakh crore during April-December of 2016-17, the bulk of which came from power, steel, road infrastructure and textile sectors.
Finance Minister Arun Jaitley has on several occasions said India needs five to six banks of global size and scale and further consolidation in the banking sector will be done at the appropriate time. Whenever consolidation happens, it takes into consideration interest of all stakeholders including employees and shareholders, the official said, adding it has to be a win-win for all parties.
A balancing act has to be done before any merger is given clearance by various authorities and regulators, the official added. The future merger proposals in the banking sector will also require clearance from the Competition Commission of India (CCI) to see if the merged entity is going to create a monopoly.
In the last consolidation drive that saw the light of day in April, CCI nod was needed only in the case of merger of the Bharatiya Mahila Bank (BMB) with SBI. There was no such requirement for merger of associate banks with SBI as they were part of the parent.
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