1. Government to go ahead with PSU bank merger without further wait: Arun Jaitley

Government to go ahead with PSU bank merger without further wait: Arun Jaitley

The government today said it is examining the possibility of further consolidation in the public sector banking space without waiting for their finances to improve.

By: | New Delhi | Published: June 5, 2017 8:08 PM
Arun Jaitley, PSU bank merger, PSU bank merger latest news, Government on merger of banks, banks merger news, Reserve Bank, Urjit Patel, consolidation in the public sector banking space Referring to the complications, he said, “Can you without segregating that (real estate), sell just the banking system which in the present state is not in the best of health. That process got slowed down a little”. (Reuters)

The government today said it is examining the possibility of further consolidation in the public sector banking space without waiting for their finances to improve. Merger of five associate banks and Bhartiya Mahila Bank with the country’s largest lender SBI took place in April. “Internally there was a thinking after the SBI amalgamation took place to wait for the rest till the health of the banks improve. “We have now relooked at the whole system and there are some institutions within the public sector banks which can be consolidated even in the present circumstances. We are seriously examining them,” Finance Minister Arun Jaitley told CNBC TV18.

Even Reserve Bank Governor Urjit Patel in April had said the Indian banking system could be better off if some public sector banks are consolidated to have fewer but healthier entities, as it would help in dealing with the problem of stressed assets. Toxic loans of public sector banks rose by over Rs 1 lakh crore to Rs 6.06 lakh crore during April-December of 2016-17, the bulk of which came from power, steel, road infra and textile sectors. Currently, there are 21 PSU banks in the country, including State Bank of India.

According to experts, Punjab and Sind Bank can be merged into Punjab National Bank, while other big lenders like Bank of Baroda can take over some turnaround banks in the southern region such as Indian Overseas Bank. Similarly, Dena Bank could be merged with some large banks like South Indian bank. On privatisation of IDBI Bank, Jaitley said that initially the government had moved substantially but the process got slowed down as it had to decide on the complicated issues related with large real estate assets of the bank in Mumbai and elsewhere.

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Referring to the complications, he said, “Can you without segregating that (real estate), sell just the banking system which in the present state is not in the best of health. That process got slowed down a little”. Jaitley in 2015 had hinted at a change in IDBI Bank wherein the government would continue to hold a majority stake, yet keep it at arm’s length. Citing the example of Axis Bank, he had wondered if IDBI Bank could follow that model.

But since then, there has not been much progress on the plans due to one reason or another. IDBI Bank has a large portfolio of real estate, which was not taken into consideration during the valuation exercise. In the year ended March 31, 2017, IDBI Bank posted a net loss of Rs 5,158 crore as against net loss Rs 3,665 crore in fiscal 2016. The bank’s gross NPAs almost doubled to 21.25 per cent of the gross advances in the fourth quarter of the last fiscal compared to 10.98 per cent in the corresponding period of the previous financial year. The net NPAs were 13.21 per cent against 6.78 per cent.

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    B S R Murthy
    Jun 7, 2017 at 7:21 am
    It's nice to hear that Govt is actively consoldering mergers of PSBs. It should have done long back atleast in case of Dena Bank United Bank IOB and Punjab Sindh Bank. But this act should be with a cautious approach as lot cultural difference among the PSBs and wrong mergers should not spoil those value based banks also.
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      Subhajit
      Jun 7, 2017 at 12:19 am
      Govt. should first lay stress on recovery of stressed et or NPA which is the root cause of banks' ill-health. Stringent law should be enacted including criminal action against defaulters of bank loan. Unless these steps are taken mere merger of banks will not improve the situation in a considerable respect.
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        Bharat
        Jun 6, 2017 at 11:55 pm
        The NPA problem will increase more in future years. Due to demonetization most of the black money in hard cash become white resulting in Banks with flush of funds. Banks will start giving loans for underserving people/projects through political and social influence resulting in unviable projects and non payment of dues to Banks in time. On the other side the Banks has immediately reduced the FD rates resulting hardship for fixed income group especially retired/senior citizens who depend on monthly interest income for subsistence.
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          Jatin
          Jun 6, 2017 at 8:51 am
          Providing sufficient capital to banks out of budgetary provisions is the solutions right now and improving law and order and giving more freedom on recovery of NPA. Bank employees and officers cannot be balmed for the present situation as most of the loans which turned NPA are big in size. As a responsible govt their role should be nourish the psu banks as every bank has their director on board than this situations arises. Govt should also release the list of willfully defaulter and should frame law to initiate criminal action against them. Many other countries like CHINA has initiated a socially boycott against such NPA Borrowers in their country India too should examine and take such bold steps.
          Reply
          1. Gopal Das
            Jun 6, 2017 at 6:30 am
            Much better idea, had it been like Indian Railway- Eastern, western, Southern, Northern railway. One of the main causes of banks making losses is Govt. decision, unholy alliance of ministers and industrialists forcing banks to bear huge burden of NPA.
            Reply
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              Sadasivan
              Jun 6, 2017 at 2:41 am
              Bank Mergers, create a su ion,as the G 20 member Nations,are reported, to have signed ,a SECRET Regulation of,the so-called , FSB ,in the G20 Meet in Australia,November 2014.The aim is to,create TBTF banks,by Mergers and misuse the said SECRET REGULATION,which says that the Depositors will have to take a hair-cut in case the banks fail and the Derivatives among banks will have priority over depositors.This is named "Bankers' Coup." And,no coincidence that,Rajan made SBI and ICICI Bank,,TBTF,in 2014! Please google for;- Bankers; coup Ellen Brown
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                Banker
                Jun 6, 2017 at 1:02 am
                The problem of stressed ets or NPA is gift from various governments to the banking system. Stop blaming banks and reworks on your so called reforms and policies in various sectors. Kindly disclose the name of all willful defaulters. The root of all problems in India is corrupt politicians. The need of the hour is to get your mentality right. Works towards the making of one India a great India.
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                  Vivek Singh
                  Jun 5, 2017 at 10:19 pm
                  Government should take a holistic view and go ahead with its idea of mergers in a phased manner, instead of going in haste and consolidating all the banks in a single shot. Analysis of problems and benefits from recently held merger of ociate banks with SBI should be done in fair terms and learning from it, steps should be taken for going ahead with one stronger bank with one weak bank on step by step basis. Present government should not forget that UPA govt has also taken similar decision of merging Indian Airlines with Air India and the same is still bleeding. Government and Bank Board Bureau should not forget that mergers would not improve the health of banks overnight. However, the turmoil in form of unrest among employees, likely to be created by mergers may let loose the focus on NPA recovery, the biggest requirement and challenge of the day, thus instead of making the consolidated iden y stronger would be making it weaker and defeating one of the very purpose of the merger.
                  Reply
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