Govt bank consolidation difficult in NDA’s first term | business-news | Hindustan Times
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Govt bank consolidation difficult in NDA’s first term

The NDA government may not be able to carry out the consolidation of public sector banks in its first term as the road map for the process is expected to be ready only by next year, according to sources.

business Updated: Sep 28, 2016 10:46 IST
Mahua Venkatesh
public sector banks

Finance Minister Arun Jaitley and the Secretary, Department of Economic Affairs, Shaktikanta Das at a seminar in Mumbai on Tuesday.(PTI)

The NDA government may not be able to carry out the consolidation of public sector banks in its first term as the road map for the process is expected to be ready only by next year, according to sources.

Moreover, these lenders continue to face the daunting task of reducing the level of non-performing assets (NPA) and find new promoters and buyers for stressed assets.

“It may be difficut for the government, RBI and the BBB under the current frame to force any merger on these banks,” Ashvin Parekh, managing partner, APA Services, said.

The Bank Board Bureau can chalk out the merger plan only when the balance sheets are “somewhat cleaned up”. The “compatibility” exercise between banks will be based on their financial status.

The State Bank of India, however, is expected to complete its merger process with its associate banks and Bharatiya Mahila Bank by the beginning of the next financial year.

“What is expected is a concrete roadmap and how it would be carried out but it will be difficult to carry out the actual process…for that you need time,” a senior government official adding that the number of state-owned lenders will be brought down in a phased manner.

At present, there are 27 government banks, of which, 12 have reported gross NPA ratio of over 10% as on June 30, 2016. Punjab National Bank has an NPA ratio of 15.41% while Bank of Baroda has a ratio 13.23%. UCO Bank has reported a gross NPA ratio of 18.66%.

The gross NPA of the state-owned banks increased to ₹5.59 lakh crore -- 11.24% of advances -- as on June 30, 2016, a 12% increase over the previous quarter.

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