India to Consider Merging Three State-Run Banks to Cut Bad Loans

(Bloomberg) -- A panel of ministers has sought to merge three state-controlled lenders as it seeks to strengthen the debt-laden banking system in Asia’s third-largest economy.

The panel headed by Finance Minister Arun Jaitley recommended clubbing Vijaya Bank and Dena Bank with Bank of Baroda, Banking Secretary Rajiv Kumar told reporters in New Delhi. The merged entity will become the third-largest bank in the country and the government will ensure that there are no job losses, he said.

The move would create fewer and better-capitalized state lenders that have been losing market share to peers in the private sector. It marks the latest attempt by the government to clean up banks that are suffering from the world’s worst bad-loan ratios after Italy. Indian banks have more than $210 billion of stressed debt on their balance sheets.

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