With the aim to have 4-5 banks of the Indian Negara Bank (SBI), the government plans to start a state-managed bank merger round after detailed study of the results of the merger in the Public Sector Bank (PSB), according to the ET report. At present, there are seven large and five smaller PSBs in India.
Careful banks have been asked to send their feedback at the end of the month. We will hold a wider consultation through the Indian Bank -Bank Association (IBA) and with other stakeholders before strengthening future strategies, “the report quoted an official.
This center in 2019 announced the merger of 10 PSB to four large lenders, dropping the number of banks managed by the government to 12 compared to 27 in 2017. The merging began in force from April 2020.
United Bank of India and Oriental Bank of Commerce joined the Punjab National Bank; Bank Syndicate Join Bank Canara; Allah’s Bank is combined with Bank India; and Andhra Bank and Corporation Bank are consolidated with the Union Bank of India.
In 2019, Dena Bank and Vijaya Bank joined the Bank of Baroda. Before this, the government had combined five SBI and Bharatiya Mahila Bank partner banks with the largest lender in India SBI.
“The government, after consulting with RBI, agreed that each public sector bank (PSB) council could consider the merger. The relevant bank council considers the merger and approves the same principle. The government, after considering the RBI input and the approval of the principle and input of the bank, Amalgamated Vijaya Bank and Dena Bank became the Bank of Baroda W.E.F. 1.4.2019 and Oriental Bank of Commerce and United Bank of India to Punjab National Bank, Andhra Bank and Corporation Bank to Union Bank of India, Syndicate Bank to Bank Canara, and Allah’s GOD to Bank India, W.E.F. 1.4.2020, “MOS finance has stated last year in a written reply to Lok Sabha.
In addition to mergers, PSB privatization is also on the card. While the government proposed the privatization of two PSBs in the last budget, some felt that the process could be started only after more consultations among stakeholders, including potential investors.
Niti Aayog has recommended the privatization of Indian Foreign Bank (IOB) and the Central Bank of India (CBI). However, the government has not received the last call about this.
The Ministry of Finance also discussed with the Reserve Bank of India (RBI), the banking sector regulator, regarding ownership and controlling betting problems related to privatization. The current promoter can hold a maximum of 26 percent of shares in private banks, according to other ET reports.
The government has registered the Banking Law Amendment Bill, 2021, in the Parliamentary Winter Session but was not introduced. The bill has proposed “amendments to banking companies (acquisition and business transfer), 1970 and 1980 and incidental amendments to banking laws, 1949”.