Arun Jaitley to head panel to oversee state bank consolidation

NEW DELHI (Reuters) - India has set up a panel headed by Finance Minister Arun Jaitley to evaluate proposals for mergers among state-run banks, the government said on Wednesday, taking the long-awaited move a step forward.

Piyush Goyal, the minister for coal and railways, and Defence Minister Nirmala Sitharaman will be the other two members in the panel that will send final proposals to the government and parliament for approval, the finance ministry statement said.

India has 21 public sector banks, which account for more than two-thirds of the country's banking assets. But a surge in bad loans and lower profitability compared with their private-sector rivals have triggered calls for consolidation among the state lenders.

Last week, the government announced a $32 billion recapitalisation plan for the state lenders over the next two years to help resolve their bad loans and meet higher capital ratios required under Basel III global banking rules.

While announcing the recapitalisation plan, senior officials had said the funding would be accompanied by other reforms in state lenders.

Sanjeev Sanyal, principal economic adviser at the finance ministry, last month said the planned consolidation may lead to 10-15 banks.

(Reporting by Manoj Kumar and Devidutta Tripathy; Editing by Malini Menon)