No bank merger before 2017-18
The roadmap to the proposed consolidation of public sector banks is expected to be rolled out by the year-end but the process may take more time to kick off. No mergers will fructify before 2017-18, sources said.business Updated: Mar 11, 2016 17:52 IST
The roadmap to the proposed consolidation of public sector banks is expected to be rolled out by the year-end but the process may take more time to kick off. No mergers will fructify before 2017-18, sources said.
“The exercise has to be very planned and thought out, since this would mean crores of customers and over eight lakh employees…so it needs research and delicate handling if the number has to be brought down to less than 10, it will take some time,” a government official on condition of anonymity told Hindustan Times.
The official also said that the process will be undertaken only after consultation with the unions and other stakeholders.
Finance minister Arun Jaitley announced on March 5 that consolidation was the way forward for state owned banks, which will have to deal with intense competition. While a committee will be set up to look into the issue, the Banks Board Bureau (BBB) to be headed by former Comptroller and Auditor General of India Vinod Rai, too will deal with this.
Sources said that the government may also look at setting up an asset reconstruction company to help banks, which are laden with non performing assets—loans that have turned unproductive—to help them clean up their books and thereby facilitate the merger exercise.
Banks, meanwhile, have started identifying their non core assets, which can be monetized to improve their financial condition.
The gross NPAs of the state owned banks increased from 5.43% as on March 2015 to 7.30% as on December 2015. The government has decided to infuse Rs 70,000 crore by 2018, of which Rs 25,000 crore of recapitalization would be provided in the current financial year and the next. As per finance ministry calculations, a sum of about Rs 1,80,000 crore was required by the state owned banks in the next three years over as and above the average profits they make.