Narendra Modi government may declare some bank mergers in current fiscal

The government may announce the merger of some public sector banks (PSBs) since the beginning of this year, and the consultation process was accelerated for this purpose, official sources told EF. Factors that would be considered as government committed construction exercises include financial burden (including stressed assets), human resource transition, regional balance, cultural ethics and geographic reach. NITI Aayog has already asked the Ministry of Finance to prepare a roadmap in strengthening PSB by exploring various options and models to create only a few large banking entities. Consultant McKinsey has learned to make a presentation to finance ministry officials recently in the experience of similar exercises carried out banking consolidation in Europe, Latin America and other parts of the world. Once the department has all the inputs will require a call to consolidation, in consultation with the Reserve Bank of India (RBI) and the Indian Competition Commission (ITC), said the official. The approval of the ICC is also necessary to give the impression that an exercise in such consolidation does not distort competition, he added. Finance Minister Arun Jaitley has said that India needs 5 to 6 major PSBs operating globally and a major consolidation in the banking sector would take place at an appropriate time. For example, a lender like Baroda Bank can support some banks in the South region that have converted or are around the corner like India Overseas Bank. Similarly, Dena Bank could merge with a large bank in southern India, sources said.
Already, five associates and Bhartiya Mahila Bank became members of the State Bank of India from 1 April. The Bikaner and Jaipur State Bank, Hyderabad State Bank, Mysore State Bank, Patiala State Bank and Travancore State Bank merged with the SBI. Another meltdown process will resume the pace once the bad loan crisis is about to begin. In December 2016, commercial banks have underlined assets (gross unproductive assets and standard restructured loans) amounting to Rs 9.64 million lakh, most of which belong to public banks. Gravitées massive debts led to a problem of matched balance: debt to companies and banks seriously borrowed bad debt – which seriously hinders investment in the economy.

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