Government may merge 27 PSBs into six: Reports

WITH public sector banks (PSBs) reeling under heavy pressure to deal with the problem of bad loans, consolidation is the only solution. This may bring down the number of lenders to about six from the present 27, participants in the recently-held Gyan Sangam, a conference for chiefs of public sector banks and financial institutions.
The time frame for the mergers will ensure there are no disruptions, reported a leading daily quoting official sources. As banks are short-staffed, a downsizing...
would not be required.
It was decided that an expert committee will be formed soon to look into the issue. The committee will work closely with the Banks Board Bureau (BBB) to identify the right matches for consolidation. The BBB, which will independently oversee consolidation and chalk out business plans for PSBs, is set to be put in place by April 1, 2016.
As it is not feasible to bring down the government’s stake in PSBs below 51 percent, consolidation to create strong banks is the only survival option. Some of the issues like technology, asset base, regional strength and cultural match would be critical in chalking out strategies and identifying banks.
“At present, public sector banks are fighting with each other for market share, but with so many payments and small finance banks coming in, the need is to consolidate and focus on strengthening the balance sheets to create big banks,” a senior government official was quoted as saying.
The finance ministry is already looking to merge the newly-launched Bharatiya Mahila Bank.
Till now, the government has been saying that it would not have any role to play in the merger exercise of PSBs. In case certain banks show unwillingness, despite plans being chalked out by the BBB and the expert committee, then the government would intervene.
The two-day Gyan Sangam summit ended in Gurgaon without any policy announcement but with the government reiterating its commitment to taking more steps to boost the sector. "Several issues were considered at the Gyan Sangam," Finance Minister Arun Jaitley said at a press conference following the event. "Among these were discussions on bank consolidation, non-performing assets, carrying out changes to recovery laws and giving out employee stock options."
Jaitley, however, said that the government would consider all suggestions that banks had made. He said that while no decision on any proposals has been taken, the government was actively looking into forming a bank consolidation committee and tweak laws such as the SARFAESI and with respect to the debt recovery tribunal. "The debt recovery tribunal will likely be streamlined to shift its processes online and an effort will be taken to compress the period taken to decide on a case in DRT," Minister of State for Finance Jayant Sinha said.