A panel of ministers under finance minister Arun Jaitley will monitor consolidation in the public-sector banking space.
The government on Monday formed a panel of ministers under finance minister Arun Jaitley to monitor consolidation in the public-sector banking space. In a tweet, financial services secretary Rajeev Kumar said: “Govt walks the talk on banking reforms; constitutes Alternative Mechanism for PSBs consolidation; Finance Minister to head.” The panel also includes defence minister Nirmala Sitharaman and railway and coal minister Piyush Goyal. The Cabinet had in August approved the “alternative mechanism” to oversee the merger of public-sector banks (PSBs). Jaitley had said the proposals for amalgamation would come from the boards of the relevant PSBs and any merger would be based on commercial considerations.
Last week, the government announced the ambitious `2.11-lakh crore recapitalisation plan for the PSBs and said complementary reforms will follow. Although the government’s immediate priority is capital infusion, it wants to put in place adequate mechanism to carry forwards its intended reforms, especially consolidation, at an appropriate time. “The immediate priority is recapitalisation, and consolidation and stake dilution will follow,” a senior government official told FE last week.
As for consolidation, official sources had said the level and management of stressed assets would be an important characteristics of the commercial considerations. The merger will be effected through a swap of shares, with no cash transaction involved. The government has made it clear it wants no job losses to take place, and all the employees of the banks to be merged will be retained. No time-frame, however, has been fixed for the amalgamation. The proposed panel mirrors a similar mechanism adopted for strategic divestment of government assets, where a group of ministers, headed by Jaitley, is monitoring the progress. The setting up of the panel is aimed at expediting the process of consolidation, without the requirement of Cabinet approval at every stage.