The government, taking a step forward, has constituted a ministerial panel headed by Finance Minister Arun Jaitley to oversee merger proposals of the public sector banks.
After the massive 2.11 lakh crore bank recapitalisation plan to rescue public sector banks ailing due to bad loans, the government, taking a step forward, has constituted a ministerial panel headed by Finance Minister Arun Jaitley to oversee merger proposals of the banks. The panel will also have Railway and Coal Minister Piyush Goyal and Defence Minister Nirmala Sitharaman.
Financial Services Secretary Rajiv Kumar on Monday announced that the government has constituted an alternative mechanism for PSBs consolidation. According to media reports, the panel will devise its own mechanism for the mergers, but will take Reserve Bank of India’s view before taking any decision.
— Rajeev kumar (@rajeevkumr) October 30, 2017
The panel has directed all 21 public sector banks to examine the consolidation proposals. It will also report to the cabinet quarterly on the progress of the mergers. The move to create large banks aims at meeting the credit needs of the growing Indian economy and building capacity in the PSB space to raise resources without dependence on the state exchequer, PTI reported.
Last week, Finance Minister Arun Jaitley announced an unprecedented Rs 2.11 lakh crore for recapitalisation of banks over the next two years in a bid to clean banks’ books and revive investment in a slowing economy. Calling the decision as “bold” Arun Jaitley said, “Between 2008 and 2013, public sector banks engaged in indiscriminate lending, which led to the rise in non-performing assets.”
Of the 2.11 lakh crore, 1.35 lakh crore will be from front-loaded recapitalisation bonds and remaining 76,000 crore from budgetary allocations and market raising. 21 public sector banks account for more than two-thirds of banking assets. These banks also account for a record 9.5 lakh crore of bad loans or non-performing assets. In India, power, steel, road infrastructure and textiles sectors are the biggest loan defaulters of state-owned banks.