The government is weighing plans for the next, and probably the final, round of public sector bank mergers, which will create 4-5 large banks like the State Bank of India (SBI), reports citing senior officials of the finance ministry said.
The government has commissioned a study that would examine the pros and cons of the amalgamation of state-run banks already undertaken, a report in The Economic Times quoted a senior finance ministry official as saying.
The government will consult with the Indian Banks Association and other stakeholders before firming up the future strategy, the official is reported to have said.
At present, there are seven large public sector banks and five smaller ones.
The government first merged five associate banks of SBI and Bharatiya Mahila Bank with India’s largest lender SBI. Following this, in 2019, Dena Bank and Vijaya Bank were merged with Bank of Baroda.
In the second round, United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank; Syndicate Bank was merged with Canara Bank; Allahabad Bank was amalgamated with Indian Bank; and Andhra Bank and Corporation Bank were consolidated with Union Bank of India.
The centre is also mulling privatisation of PSBs, but the process could be initiated only after more consultations among stakeholders, including potential investors.
The government had, in the last budget, proposed privatisation of two PSBs - Indian Overseas Bank (IOB) and Central Bank of India (CBI) – as recommended by Niti Aayog.
The finance ministry is also in consultations with the Reserve Bank of India (RBI) on ownership and controlling stakes issues relating to privatisation.
The government may also have to get the Banking Laws Amendment Bill, 2021 passed before it can proceed with the privatisation proposal.
The Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, requires the central government to hold at least 51 per cent of public sector banks.