Four state-run lenders —Syndicate Bank, Canara Bank, Vijaya Bank andDena Bank — have made presentations to the finance ministry on their consolidation plans. Government think tank Niti Aayog has also been asked to offer its suggestions on the amalgamation of public sector banks. A senior government official confirmed both developments.
The four banks made their presentations separately last week to senior finance ministry officials on various aspects including existing loan portfolios, deposits, bad loans, human resource practices, non-core assets and the geographical spread of their branches.
Based on the presentations, the government is expected to point out merger possibilities to the banks and nudge them in that direction. It has said previously that there will be no shotgun weddings. The finance ministry is expected to seek similar presentations from other state-run banks as well. There are as many as 21 state-run banks in India, making for a large number of small banks that punch below their collective weight. China’s banks, for instance, dominate the top 10 list of global banks
Finance minister Arun Jaitley had said on Monday, after reviewing the performance of state-run banks, that the government was “actively working” toward consolidation of public sector banks but declined to provide details, saying this was price-sensitive information. “Consolidation of banks was not on the agenda as far as this present meeting (on Monday) is concerned. But I can tell you, we are actively working in that direction,” he had said.
The government official cited above said the presentations by the banks was a preliminary exercise and no plans have crystallised. “Some of these banks may be asked to close their subsidiaries as the government does not want conflicting subsidiaries if the lenders get merged,” he said, adding that the finance ministry will also consider suggestions from the Niti Aayog.
“Aayog is an advisory body. Let us see if they can come up with some interesting ideas,” said another finance ministry official aware of the development. “We will also seek presentation from other banks which are in the consideration zone,” he said, adding that an ideal case would be to end up with threefour large banks with a pan-India presence.