GOVERNMENT PLANS TO START THE NEXT ROUND OF PUBLIC SECTOR BANK MERGERS
The authorities plan to provoke the next round of public sector bank mergers after analysing in-depth research that has been commissioned on the result of an amalgamation in state-run banks, a senior finance ministry official mentioned.
The aim is to have 4-5 large banks as large and strong as the country’s biggest lender State Bank of India said the official who requested anonymity. At current, there are seven giant public sector banks and 5 smaller ones.
“Concerned banks have been asked to submit their feedback by month end. We will be holding wider consultations through Indian Banks’ Association (IBA) and with other stakeholders before firming up the future strategy,” the individual mentioned.
In 2019, the federal government had introduced the merger of 10 nationalised banks into 4 giant lenders, thereby bringing down the number of public sector banks (PSBs) to 12. There had been 27 state-run lenders in 2017. The merger had come into impact beginning in April 2020.
“IN 2017 Five associates banks and Bhartiya Mahila Bank merged with SBI. In 2019 Bank of Baroda, Vijaya Bank and Dena Bank merged. In 2020 oriental Bank of Commerece and United Bank of India merged with Punjab National Bank. Syndicate bank merged with Canara bank. Andhra Bank and Corporation Bank merged into Union Bank of India. Allahabad bank merged with Indian bank.”
Earlier this week, a report on privatisation of PSBs by the National Council of Applied Economic Research (NCAER) made a case for privatisation of all PSBs besides SBI.
The report authored by NCAER’s director Poonam Gupta and economist Arvind Panagariya famous that PSBs have principally lagged behind non-public banks in all the foremost indicators of efficiency over the past decade. “They have seen soured loans and operational costs soared,” it mentioned. “These PSBs have also attained lower returns on assets and equity than their private sector counterparts.”
The finance ministry official, nevertheless, mentioned that state-owned banks have improved their efficiency on all main indicators in a previous couple of years and in FY22 doubled their income.
“The government will continue to maintain its presence in this sector although we will like to bring down the number to around 4-5 from the existing 12 banks,” said the official quoted above.
The government will likely introduce a bill in the upcoming monsoon session of parliament to make amendments to facilitate privatization of state-run banks.