NEW DELHI: The unprecedented losses posted by public sector banks, especially large lenders, such as Punjab National Bank, Bank of Baroda and Bank of India, could speed up the bank consolidation process that is under consideration.
The merger exercise would be undertaken in a phased manner, and the plan is likely to be firmed up by the year-end, sources said.
“With huge losses that several banks have posted in the fourth quarter, the government and the Banks Board Bureau will have to look into the merger issue at the earliest,” said an official, who did not wish to be identified.
Finance minister Arun Jaitley said on Monday that the government is keen to kickstart the consolidation exercise among banks, and a decision on State Bank of India’s merger with associate banks and Bharatiya Mahila Bank will be taken soon.
“We are looking at SBI at the moment…” he said. “It is with the government ... the government’s policy by and large supports consolidation. I have indicated that in the budget itself.”
The government is keen to bring down the number of state-owned banks to about six from the current 27.
Gross NPAs for state-owned banks rose to Rs 3.61 lakh crore at the end of December 2015, from Rs 2.67 lakh crore at the end of March 2015 — a rise of Rs 94,666 crore, according to official data.