Modi govt seeks RBI's views on specific public sector bank mergers

The National Democratic Alliance (NDA) government has asked the Reserve Bank of India (RBI) for its suggestions on specific public sector banks (PSBs) that could be merged in a bid to achieve synergy.

“The government has requested the RBI for views as well as suggestions regarding specific possible combinations to achieve scale and synergy for appropriate consideration,” Minister of State for Finance Shiv Pratap Shukla said in a written reply in the Rajya Sabha on Tuesday. The government felt there might be various approaches on the merger of PSBs, and the RBI’s views could act as a guiding principle, a senior finance ministry official said.

In August last year, the government had approved a framework for the merger of PSBs. The Centre had said the merger proposal should ideally start from the board of banks and be “solely based on commercial considerations.”

The government had constituted a group of ministers, known as an alternative mechanism, for considering merger proposals from PSBs. Shukla said the alternative mechanism had not received any proposal from PSBs so far.

“No timeline has been fixed for merger of public sector banks,” the minister said in his response.

The group of ministers was supposed to consider proposals from banks, direct banks to examine the proposals for amalgamation, and receive inputs from the RBI before according an in-principle approval.

The ministers included Finance Minister Piyush Goyal, Defence Minister Nirmala Sitharaman and Union minister Arun Jaitley.