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Giving preference to consolidation for robust banks, Finance Minister Arun Jaitley on Friday said he would rather have a merger of strong banks rather than weaker ones.
“The object of consolidation is to create bigger and stronger banks,” Jaitley said, speaking at Bloomberg’s India Economic Forum here. Bank consolidation has to move in tandem with the process of strengthening the banks, which are struggling with asset quality issues, Jaitley said.
So far, the focus was on merging weak banks with relatively stronger counterparts in the public sector space. Bankers have expressed reservations over this approach as it hardly addressed issues of asset quality problems and capital.
Referring to divestment in Air India, Jaitley said the process disinvestment was moving “quite well” and transaction advisors would be appointed soon. The government has invited applications for an asset valuer for the national carrier as well as its subsidiaries and overseas offices, a PTI report said on Friday.
There have been a number of meetings of the ministerial panel and committee of secretaries on how to deal with the main company and the five subsidiaries. “We have worked up those,” the minister said.
Addressing bankers earlier in the day, the finance minister said the government was facing two major challenges — encouraging private sector investment and improving the capacity of the banking system to support growth. “We have done adequate amount of analysis on the causes for challenges. Now we have to look for solutions for them,” he said in his address at the Indian Bank Association’s annual general meeting.