The Hindu : Business : PSBs asked to consider mergers

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Thursday, Jun 11, 2009
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PSBs asked to consider mergers

Special Correspondent

Centre assures support in such a process of consolidation

NEW DELHI: The Central Government on Wednesday asked public sector banks (PSBs) to seriously consider the issue of mergers as an option to become globally competitive while assuring its support in such a process of consolidation.

Reducing risk

Briefing the media after his meeting with chief executives of State-owned banks and financial institutions here, Finance Minister Pranab Mukherjee said: “The PSBs should look at consolidation as a serious option in order to reduce risk to financial stability and to face competition”.

The initiative for merger, Mr. Mukherjee pointed out, should originate from the management of various banks and the government would provide support in such ventures. “Any consolidation initiative in the banking sector would be viewed positively and the government, as a majority shareholder, would continue to play a supportive role,” he said.

Apart from State Bank of India (SBI), the country’s largest lender and its six associates, some of the other large nationalised banks are: Punjab National Bank, Canara Bank, Bank of Baroda and Bank of India.

Reacting to Finance Minister’s assurance of the government’s support in this regard, SBI Chairman O. P. Bhatt said: “We are looking at it [merger of associate banks] constantly. Now [the] new government is there...we will formulate our views within next month or so with regard to consolidation…Once we get signals [from government], process will not take more than three to six months”.

While State Bank of Saurashtra had already been amalgamated, SBI still has six associate banks and the largest among them is State Bank of Bikaner & Jaipur.

Proposal

Finance Secretary Ashok Chawla noted that there was indeed scope for consolidation of PSBs. “The initiatives must be from the bank managements... the government will be happy to facilitate,” he said while pointing out that the proposed merger of SBI’s associate banks was under examination. “We have a proposal...we will see,” he said.

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