Consolidation of PSBs will take place with the setting up of an expert committee which would work along with the Banks Board Bureau (BBB) to identify the right matches
Consolidation is seen as the way forward for the India's public sector banks (PSBs) that have been reeling under the pressure of mounting bad loans. Participants of the Gyan Sangam event, which is organised for heads of PSBs and financial institution said that this could bring the number of banks to six from the present 27, according to a Hindustan Times report.
According to the report, the time frame for the mergers will ensure that there are no disruptions and that since these banks are short-staffed there would be no need for downsizing.
The consolidation will take place with the setting up of an expert committee which would work along with the Banks Board Bureau (BBB) to identify the right matches. The BBB will be put in place by April 1, 2016 and will independently oversee consolidation and chalk out business plans for PSBs.
Participants from the events said that since it is not feasible to bring down the government's share in state-owned banks below 51%, consolidation to create strong banks is the only option, according to the report.
Some of the things that will be critical in the consolidation process would include issues such as technology, asset base, regional strength and cultural match.
A senior government official in the report said that at present the PSBs are fighting with each other for market share, but with so many payments and small finance banks coming there is a need to consolidate and focus on the balance sheets to create big banks.
The finance ministry is already planning to merge newly-launched Bharatiya Mahila Bank.
The official also added that the government would intervene in case certain banks show unwillingness to merge after the plans are created by the BBB and the expert committee.
The government until now had maintained that it would not involve itself in any merger exercise of public sector banks.
The government in Budget 2016 had reported the infusion of Rs 25,000 crore into ailing PSBs and added that it would unveil its consolidation plans.
Finance Minister Arun Jaitley too had said that the government would set up an expert group on the consolidation of banks.
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