New Delhi: The government is working on a consolidation agenda with a view to creating 3-4 global-sized banks and reduce the number of state-owned lenders to about 12, an official said.
The 21 public sector banks would get consolidated to 10- 12 in the medium term, the official said.
As part of a three-tier structure, the official said, there would be at least 3-4 banks of the size of SBI, the country’s largest lender.
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, the official added.
Last month, Finance Minister Arun Jaitley said the government is “actively working” towards consolidation of public sector banks but declined to provide details, saying this was a price-sensitive information.
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.
According to former RBI governor C Rangarajan, 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 said.
One of the possibilities is that large public sector banks (PSBs) like Punjab National Bank, Bank of Baroda, Canara Bank and Bank of India could try looking for potential candidates for acquisition, another official said, who did not wish to be identified.
Factors like regional balance, geographical reach, financial burden and smooth human resource transition have to be looked into while taking a merger decision, they said, adding a very weak bank should not be merged with a strong one “as it could pull the latter down”.
In the last consolidation drive, five associate banks and Bharatiya Mahila Bank (BMB) became part of SBI on April 1, 2017, catapulting the country’s largest lender to among the top 50 banks in the world.
State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides BMB, were merged with SBI.
With the merger, the total customer base of SBI reached around 37 crore with a branch network of around 24,000 and nearly 59,000 ATMs across the country. The merged entity began operation with deposit base of more than Rs 26 lakh crore and advances level of Rs 18.50 lakh crore.
‘Rs 8 L cr NPAs may face bankruptcy proceedings by Mar 2019′
Bankruptcy proceeding against Rs 8 L cr NPAs likely
Emboldened by the Banking Regulation (Amendment) Ordinance, the RBI is expected to push for resolution bad loans worth around Rs 8 lakh crore by March 2019, a move that could bring down the NPAs and improve the financial health of banks, a study by Assocham said.
So, it should be safe to assume that the non-performing assets (NPAs) mess would largely be resolved by the first quarter of financial year 2019-20, Assocham study titled ‘NPAs Resolution Light at the end of tunnel by March 2019′ said.
This would be helped by a combination of several factors – turnaround in the economic cycle and some resolute steps by the government and the Reserve Bank of India to fix the issue, it said.
Although entire NPAs could be put on the altar of Insolvency and Bankruptcy Code (IBC) resolution mechanism, it has to be seen how much and how fast they actually goes out from the balance sheets of banks which at this point of time seem very stressed, it said.
To begin with, the RBI empowered by the ordinance initiated the process of resolution and identified 12 accounts each having more than Rs 5,000 crore of outstanding loans and which accounting for 25 per cent or nearly Rs 2 lakh crore of total NPAs of banks for immediate referral for reaching a conclusion under the IBC. PTI
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