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  1. PSU banks merger: Modi government asks RBI to consider consolidation idea; here’s why

PSU banks merger: Modi government asks RBI to consider consolidation idea; here’s why

With a view to achieve scale and synergy in the public banking space, the government has asked the RBI to examine the possibility of the idea of the merger of public sector banks.

By: | Published: July 25, 2018 9:59 AM
RBI governor Urjit Patel in his last outing before the parliamentary panel has asked for more powers to regulate PSBs as effectively as it is done in the case of PSBs. (Reuters)

With a view to achieve scale and synergy in the public banking space, the government has aksed the RBI to examine the possibility of the idea of merger of public sector banks. “Since various approaches involving varying processes are possible with regard to synergy/consolidation amongst PSBs, Government has requested the RBI for views as well as suggestions regarding specific possible combinations to achieve scale and synergy for appropriate consideration,” PTI reported citing Minister of State for Finance Shiv Pratap Shukla’s written reply to the Rajya Sabha.

However, the reply also said that there is no fixed timeline fixed for such a merger.”Since various approaches involving varying processes are possible with regard to synergy/consolidation amongst PSBs, Government has requested the RBI for views as well as suggestions regarding specific possible combinations to achieve scale and synergy for appropriate consideration,” PTI reported him saying.

Meanwhile, RBI governor Urjit Patel in his last outing before the parliamentary panel has asked for more powers to regulate PSBs as effectively as it is done in the case of PSBs. “Some of the members think the government should consider giving more power to the RBI if such a move can better prevent frauds at PSBs,” Financial Express report said.

The parliamentary committee is also working towards pushing for better governance standards at PSBs. It will likely to submit a report on reforms in banking in a month. The panel could also expressed its concerns against arrests of bankers without credible evidence of wrong-doing, as any such move would hamper decision making.

Finance minister Piyush Goyal last month had said the government believes power is already available with the RBI. Still, the government is open to giving more power to the central bank if it is required to regulate and supervise public sector banks (PSBs) better, he added.

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