An announcement to this effect is likely to feature in the forthcoming budget. The merging banks are also likely to get tax exemptions on the total losses.
Addressing reporters after finance minister P Chidambarams meeting with the captains of the 27 public sector banks (PSBs), here on Friday, NS Sisodia, secretary, financial sector, said that a decision on the issue would be taken after weighing the pros and cons.
Mr Sisodia said banks have demanded income tax sops for mergers and acquisitions. They also urged the government to allow them to issue long term tax-saving infrastructure bonds.
The PSB chiefs also demanded more managerial autonomy for promotions, remuneration, branch expansion and venturing into new businesses, said Mr Sisodia.
A suggestion was made that banks should be allowed to raise infrastructure bonds. We will have to examine the issue in detail before taking a decision on it, Mr Sisodia said.
The government has decided to provide credit assistance under the Rajiv Gandhi Tsunami Relief package. The banks have been asked to clear loan applications of people in tsunami-hit areas within 48 hours and restructure their debts.
Indian Banks Association chairman PS Shenoy said that the relief would be as per the RBI guidelines for offering assistance to calamity-hit people.
Discussions were also held on the draft paper seeking to bring in changes in banks pertaining to managerial autonomy, corporate governance and technology.
Mr Shenoy added that interest rates are likely to remain in the short term. Though interest rates are likely to remain stable, it would also depend on the budget, he said. He added that there was enough liquidity in the market.