Govt drags feet on PSU bank mergers

The Finance Ministry is yet to take a stand on the issue of consolidation among state owned banks. With the global financial meltdown, the ministry is not sure whether or not to “go ahead” with the consolidation exercise, reports Mahua Venkatesh.

The Finance Ministry is yet to take a stand on the issue of consolidation among state owned banks. With the global financial meltdown, the ministry is not sure whether or not to “go ahead” with the consolidation exercise.

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A senior government official told Hindustan Times on condition of anonymity that there is lack of clarity on the issue following the global financial crisis and mounting domestic pressure from various trade unions.

“There is no holistic approach to the issue. There is ambiguity over mergers of state-owned banks as at this stage, when the economy needs to be boosted, the government is not in any mood to take chances and experiment,” the official said.

The trade unions have threatened to go on indefinite strikes if the government or the bank pursued the consolidation exercise.

“We will take strong action, and if need be we would go on an indefinite strike if there is any move towards consolidation,” said CH Venkatachalam, general secretary, All India Bank Employees Association, which represents more than 7.5 lakh bank employees across the country.

Though the government has reiterated that consolidation would be critical for banks to attain size to compete with the global banking giants, it has not given its approval for the merger proposal of State Bank of Indore with its parent State Bank of India.

“The proposal is pending and the finance ministry has not taken a call on it,”

The boards of the respective banks have already given in-principle approval for the merger in June this year.

SBI holds 98.05 per cent stake in State Bank of Indore, which is the smallest of the six associates of the parent bank.

The government has sought more clarifications on issues relating to workforce integration and cost benefit analysis from the State Bank. SBI had merged State Bank of Saurashtra with itself in August. This exercise was taken up as an experiment which worked, an official source said.