Bank Consolidation, Better Recoveries Among Key Priorities For Modi 2.0

Merger of state-owned lenders to create globally competitive banks and better recoveries through resolution of stressed assets will be among the key priorities of the new government, according to two government officials.

After the success of two mergers in public sector banking space in the Modi government’s first tenure, its emphasis is to create larger banks and then capitalise them. In April 2017, State Bank of India merged its five associate banks, while Vijaya Bank and Dena Bank were amalgamated with Bank of Baroda in April this year.

The government also sees public sector banks improving their recoveries from stressed assets in the ongoing fiscal year, one of the officials cited above told reporters. In 2018-19, total gross recoveries of state-owned lenders were Rs 1.22 lakh crore against the targeted Rs 1.8 lakh crore. Out of Rs 1.22 lakh crore, around Rs 55,000 crore was recovered through cases in the National Company Law Tribunal, the official added.

Resolution of stressed assets worth Rs 70,000 crore, which were due in the last financial year, including Essar Steel Ltd. and Bhushan Power & Steel Ltd., are expected to be completed this year.

These two issues are expected to top the EASE (Enhanced Access and Service Excellence) 2.0 agenda, a successive version of EASE reforms agenda that focused on six themes of transformation. These six broader themes were customer responsiveness, responsible banking, credit off-take, Udyami Mitra for MSMEs, deepening financial inclusion and digitalisation, and developing Brand PSB.