Govt to initiate PSBs' consolidation process after Q1 results

While taking a merger decision, financial performance needs to be considered

The finance ministry is expected to initiate the process of consolidation of public sector banks (PSBs) once the first quarter results of the current fiscal have been announced, a senior official has said.

There are various things including financial performance which have to be looked at before a merger decision is taken, said the official at the ministry.

There are factors like regional balance, geographical reach, financial burden and smooth human resource transition that have to be looked into while taking a merger decision, the official said, adding that there should not be merger of a very weak bank with a strong one as it could pull the latter down.

"So, it is going to be a complex exercise. Let the June- quarter numbers of all banks be finalised first, then there could be some action on this front," said the official, who did not want to be identified.

The finance ministry had called few banks including Dena Bank some months ago to get a sense from them about their financial position like capital adequacy ratio and NPAs and CBS technology that they operate on.

The government had however said last week that there is no proposal for consolidation of PSBs at present.

"There is no such proposal under the consideration of the government for consolidation of PSBs at present," Minister of State for Finance Santosh Kumar Gangwar had said in a written reply to the Lok Sabha.

In the last consolidation drive, five associates and Bharatiya Mahila Bank (BMB) became part of SBI on 1 April 2017, catapulting the country's largest lender to among the top 50 banks in the world. State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides BMB, were merged with SBI.

With the merger, the total customer base of the SBI reached around 37 crore with a branch network of around 24,000 and nearly 59,000 ATMs across the country. The merged entity began operations with deposit base of more than Rs 26 lakh crore and advances level of Rs 18.50 lakh crore.

The government in February had approved the merger of these five associate banks with SBI. Later in March, the cabinet approved merger of BMB as well. SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with it.