Thanks to the growth of foreign giants, the government is likely to ask public sector banks to prepare a roadmap for consolidation in the banking space. Banks could seek “active involvement” of the government for the exercise. The finance ministry had earlier left it to banks to initiate the process.
The government, which is the majority shareholder in all public sector banks, must be more proactive in initiating the consolidation move, said the chairman of a public sector bank chairman on the condition of anonymity. “Until the government plays a more proactive role in the consolidation exercise, it would be difficult and time consuming for the exercise to fructify.”
Home minister P Chidambaram, who was earlier in charge of the finance ministry, had stressed on consolidation but left it on bank boards to take the final step. “There has been no result and there cannot be any result in case the government decides to remain passive in such a move,” the chairman said.
State Bank of India is already the process of merging all its associate banks. “The move has been a success unlike what was feared, we hope to see it happen with other state-owned banks as well,” a finance ministry official told Hindustan Times.
Public sector bank unions have called for a nationwide strike on July7 to protest against the government move to resort to outsourcing of certain banking activities, merge the associate banks of SBI with the mother entity and avail World Bank loan to capitalise these banks. The unions have opposed the moves fearing a massive job cut.