'PSU bank boards will take call on consolidation, not govt'

As banks seek to join the top global league in terms of size, the government today assured them it will not force any merger among them and it will be up to the banks themselves to take a call on any consolidation.
The government will only "sensitise" the lenders about the possibility of a merger and if their boards decide to engage into any consolidation deals they can approach the government for necessary approvals, Financial Services Secretary Hasmukh Adhia said.
"The banks were of the view that when it comes to consolidation, the bank boards will themselves decide whether it is good for us to have any consolidation. This is the view of the bankers which the government respects, we would not like to mandate them saying do this or do that," Adhia told reporters here at the end of a two-day bankers' retreat.

He said Prime Minister Narendra Modi has promised that the government will not to interfere with the running of a banks and wondered how the government can force down a consolidation when it has clearly spelt out its intent.
He said the government will only "sensitise" the lenders about the possibility of a merger and attempts like the retreat is one of the ways of driving the process.
"If two banks' boards decide to come together, they can get into a conversation around it and they can request the government to approve it," Adhia said.

Adhia said in his address that Modi has asked the bankers present, most of whom were PSBs, to create an entity which is among the ten large banks in the world.

At present, the country's largest lender, State Bank of India is ranked in the 60s in terms of asset size. It is the only Indian bank among the world's largest 100 lenders.
State-run banks' merger has been talked about for long, especially given the need to create a lender of a global size. The government has earlier said said it would like to first merge SBI and its associate banks together first and then get to merging other banks.
According to some analysts, the government would like to merge a strong bank with a weaker one and also look at complementarity on the geographical presence front while taking such a call.

Other issues like the working ethos in a bank are also important and would have to be looked into. Bank unions are vociferously opposing plans of such mergers.