At a time when the contours of the banking industry are set to change with several more lenders expected to come up in the country by year-end, while a few could be merged, the Competition Commission of India (CCI), the country’s fair trade regulator, has finally been given oversight powers to prohibit monopoly in the sector.
However, in case of a merger of a failed bank with another healthy lender as in the case of bankrupt Global Trust Bank that was amalgamated with the state-owned Oriental Bank of Commerce in 2004, the Reserve Bank of India (RBI) would get full power to decide on the fate.
Earlier, any mergers in the banking space were kept out of CCI’s ambit.
“While any merger in the banking space would need the approval of the CCI, we would not play a role in case of a merger of a failed bank with another bank as in such cases there is no time for scrutiny because public money is involved and it needs to be addressed immediately,” Ashok Chawla, chairman, CCI, told HT.
The finance ministry has already indicated that it may initiate consolidation among public sector banks to create mega-banking entities to compete with foreign banks. Such mergers too may have to pass through CCI’s scanner.
“We understand the need to create banking behemoths to compete with the foreign banks but in case there are mergers among government-run banks, CCI would definitely go through the process,” Chawla added.