Centre hopes to have 4-5 large banks like SBI as it plans next round of PSB mergers

Three years back in 2019, the Centre had announced the merger of 10 nationalised banks into four large lenders, in turn reducing the number of public sector banks to 12. Two years before that in 2017, India had 27 state-run lenders. The merger had come into effect starting April 2020.

New Delhi: According to a senior financial ministry official, the Centre is aiming at commencing the next round of public sector bank mergers with the hope of having 4-5 large banks. This would be done after examining a comprehensive study that has been commissioned on the outcome of amalgamation in state-run banks.

With the merger, the Centre is hoping to have 4-5 large banks as large and strong as the country’s biggest lender State Bank of India, the official told Economic Times requesting anonymity. Currently, India has seven large public sector banks and five smaller ones.

“Concerned banks have been asked to submit their feedback by month end. We will be holding wider consultations through Indian Banks’ Association (IBA) and with other stakeholders before firming up the future strategy,” the person said.

Merger announcement

Three years back in 2019, the Centre had announced the merger of 10 nationalised banks into four large lenders, thereby reducing the number of public sector banks to 12. Two years before that in 2017, India had 27 state-run lenders. The merger had come into effect starting April 2020.

Meanwhile, a National Council of Applied Economic Research (NCAER) report on privatisation of PSBs argued in the favour of privatisation of all PSBs barring SBI. It underscored that PSBs have mostly lagged behind private banks in all the major indicators of performance during the last decade. Authored by NCAER’s director Poonam Gupta and economist Arvind Panagariya, the report said, “They have seen soured loans and operational costs soared. These PSBs have also attained lower returns on assets and equity than their private sector counterparts.”

sourcelink