August 24, 2017
Finance minister Arun Jaitley unveiled an alternative mechanism for PSU bank merger, after it was approved by the Union Cabinet. Mr. Jaitley addressed the media and said that any proposal to merge banks should be initiated by the boards of state-owned lenders. He also said that the proposal to merge should be based on commercial considerations, as reported by the The Hindu Business Line.
The banks will be taking steps as per prevalent laws and SEBI requirements once they get in-principle approval for a merger. “The final scheme will be notified by the Central government in consultation with the Reserve Bank of India,” the Finance Minister told newspersons after the Cabinet meeting.
He further said that this decision will help in creating banks that are strong and competitive and will be able to absorb shocks. They will also have the capacity to raise resources without depending on the state exchequer.
The Prime Minister will pick the ministers to be included in the panel for implementing this alternative mechanism. But Arun jaitley and Nitin Gadkari, Minister of Road Transport and Highways, are most likely to be included in this panel.
Currently, there are 20 public sector union (PSU) banks in the country, including the State Bank of India (SBI), which recently merged with its five associate banks along with the Bharatiya Mahila Bank.
Earlier, the Government of India come up with a plan to merge 21 public sector banks into 12 banks. The purpose behind this consolidation program is to create 3 – 4 global sized banks like SBI and reduce the numbers of state owned banks to 12. Read more about it here.