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Further Consolidation In State-Owned Banks After NPA Resolution, Government Says

The government sees scope for consolidating 3-4 PSU banks.



A man holds a two thousand Indian rupee banknote and a five hundred Indian rupee banknote for a photograph. (Photographer: Dhiraj Singh/Bloomberg)
A man holds a two thousand Indian rupee banknote and a five hundred Indian rupee banknote for a photograph. (Photographer: Dhiraj Singh/Bloomberg)

The government is open to further consolidation in public sector banks but only after it comes up with a resolution policy for mounting non-performing assets, a senior finance ministry official told reporters.

There is scope for further consolidation of three to four state-owned banks, the official said, adding that at this point, it may entail merging a weak bank with a healthy one and will make the merged entity weak.

The Reserve Bank of India Governor Urjit Patel too backed consolidation in the PSU banking space in a recent public address. While delivering the Kotak Family Distinguished Lecture at Columbia University, Patel had said it is better to have fewer but healthier banks.

"It is not clear that we need so many public sector banks. The system could be better off if they are consolidated into fewer but healthier banks, Patel was quoted by PTI in a story.

He had also said that since there were cooperative banks and microfinance institutions to provide community-level banking, "some banks can be merged, as a quid pro quo for timely government technical injection".