And now, Bank of Baroda and Canara Bank may merge smaller peers

The next round of bank consolidation will see state-owned Bank of Baroda and Canara Bank acquirng smaller banks like Vijaya Bank, United Bank of India, Union Bank of India, Dena Bank and UCO Bank, say reports.

The government, according to the reports, is currently holding discussions with six or seven banks to examine synergies as it pushes for consolidation among public sector banks.

''Talks are on to see which fit will be the best. We should see something emerge from the discussions with six or seven banks over the next month or two,'' reports quoted an official as saying.

While State Bank of India has already merged with its associate banks, merger of the other banks will undergo greater scrutiny in terms of gegraphical base, level of technological integration, financial health, the level of non-performing assets and human resources.

While the number of branches may see a reduction under branch rationalisation, officials said there would be no job losses.

Particular care will be taken to ensure that the stressed assets of a bank up for acquisition will not burden the stronger bank which is taking over it. State-owned banks are struggling with over Rs6,00,000 crore of NPAs.

With NPAs of state-owned banks on the rise, the government estimates banks' capitalisation requirements rising beyond the Rs10,000 crore provided for in the current year's budget.

Bank of Baroda earned a net profit of Rs1,383 crore in FY17, against a net loss of Rs5,396 crore in the previous year while the bank's NPAs increased by 5.4 per cent to Rs42,719 crore as of 31 March.

Canara Bank reported a net profit of Rs1,122 crore for the 2016-17 fiscal, against a net loss of Rs2,813 crore in the previous financial year while its gross non-performing assets (NPAs) rose 8.1 per cent to Rs34,202 crore as of 31 March 2017.

State-run banks reported a combined operating profit of Rs1,50,000 crore in 2016-17, but reported a net profit of Rs574 crore due to tighter provisioning norms.