Government wants to merge 27 state-owned banks into 4-5 large sized lenders

The government wants to consolidate 27 state-owned banks in India, including SBI, PNB, Canara Bank and Bank of India, and make them into 4-5 large-sized lenders. This process will begin once SBI merges with its associates this fiscal.

Meanwhile, a finance ministry official said that it’s also looking at its stake in IDBI Bank coming down from 80% to 60% if stake dilution happens via QIP.

"Finance Ministry's view is that there should be 4-5 lenders after consolidation of PSU banks. To begin with, SBI and its associate banks are to be merged, while decision on other banks will be taken in due course," the official added.

The official also said that SBI’s merger with associate banks will most likely take place towards this fiscal’s end.

"Trade unions will have to be taken on board before the consolidation exercise starts," the official added.

It was in his Budget speech this year that India’s Finance Minister Arun Jaitley had announced government’s plan to consolidate PSBs that it expects to get an infusion of Rs 25,000 crore this fiscal. "We have now undertaken this exercise of recapitalisation of banks within the existing resources. I am trying to find additional resources for that purpose...strengthen the banks. Once they are strengthened, I am going for consolidation of some of the banks," Jaitley had said.

The government has now announced a revamp plan called 'Indradhanush', as per which it plans to infuse Rs 70,000 crore in state-owned banks over the coming four years, while needing to raise a further Rs 1.1 lakh crore from markets so that they can meet their capital requirements in line with global risk norms Basel-III.

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