PSBs should reach consensus with employees on consolidation

Mumbai, March 29 | Updated: Mar 30 2006, 05:30am hrs
The ministry of finance (MoF) has asked the banks to continue and deepen the dialogue with employees and officers to obtain consensus in favour of consolidation.

Reiterating that the consolidation in banking industry will have to be driven by the boards of the banks, MoF has said that no directive on the issue has been issued either by the Centre or Reserve Bank of India (RBI).

The boards of the banks have to take decision in this rigours based on the synergy levels of merging/consolidating entities, said MoF in its annual report, adding that as part of new initiative, the public sector banks are seriously evaluating consolidation as one of the strategies to add value.

While supporting any merger proposal, government will ensure that the interests of the stakeholders and employees of the merging banks is adequately protected, said the report.

The union finance minister P Chidambaram, in his meetings with chief executive officers of the state owned banks, had emphasised that to accelerate the process of consolidation in the banking sector, it is necessary that all the stakeholders be sensitised. Before considering any proposal, the unions may be suitably sensitised on the need and advantages of consolidation and their apprehensions may be allayed, suggested Mr Chidambaram.

Coming To Terms
The boards of the banks have to take decision on consolidation
The government would consider specific proposals as they arise
Small and weak banks pose systemic risks with their low capital adequacy ratio and high NPAs
The Indian Banks Association had recommended that the government should consider proposals for consolidation between nationalised banks in order to strengthen them. The government has also indicated that it would consider specific proposals from nationalsied banks as they arise.

Any such proposal for consolidation by way of merger of the nationalised banks with another nationalised bank has to come from the management of the banks concerned, with government playing a supportive role as the common shareholder.