Major focus of the government is to create 3-4 global-sized banks like the size of State Bank of India (SBI) and reduce the number of state-owned lenders to about 12. An official was quoted by PTI saying that the 21 public sector banks would get consolidated to 10-12 in the medium term and as part of a three-tier structure, there would be at least 3-4 banks of the size of SBI which is the country’s largest lender.
The official further added saying that some region-centric banks like Punjab and Sind Bank and Andhra Bank will continue as independent entities while some mid-size lenders would also co-exist. Union Finance Minister Arun Jaitley had said in the last month that the government is “actively working” towards consolidation of public sector banks but declined to provide details, saying this was a price-sensitive information. As per details by PTI, enthused by the success of SBI merger, the finance ministry is considering clearing another such proposal by this fiscal if bad loan situation comes under control by then.
As per details by Zee Business, United Bank and P&S bank would merge into Bank of Baroda. Meanwhile, Indian Overseas Bank, Syndicate Bank and UCO Bank will merge into Canara Bank. The Zee Business report further states that IDBI Bank, Central Bank and Dena Bank will all merge into Union Bank while Andhra Bank, Bank of Maharashtra and Vijaya Bank will merge into Bank of India
In February, the government had approved the merger of these five associate banks with SBI. Later in March, the cabinet approved the merger of BMB as well. SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with it.
While taking a merger decision, factors like regional balance, geographical reach, financial burden and smooth human resource transition have to be looked into. It has to be noted that a very weak bank should not be merged with a strong one “as it could pull the latter down. Former RBI governor C. Rangarajan was quoted saying that the system will have some large banks, some small banks, some local banks and so forth. “What is needed in the system is variety,” Rangarajan was quoted by PTI.
The Parliament was informed on Tuesday that 9 of the 21 public sector banks, including IDBI Bank and Indian Overseas Bank, reported losses during 2016-17 while as many as 13 state-owned banks had reported losses during the 2015-16 financial year. As per details by Minister of State for Finance Santosh Kumar Gangwar in Rajya Sabha on Tuesday, IDBI Bank had reported a loss of Rs 5,158 crore in the last fiscal, while the amount was Rs 3,417 crore in the case of Indian Overseas Bank. Other loss making state-owned banks were Allahabad Bank, Bank of India, Bank of Maharashtra, Central Bank of India, Dena Bank, Oriental Bank and UCO Bank.