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Indian Overseas Bank & Andhra Bank among 8 identified for merger by Modi govt

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Finance Ministry sources say background work for the mergers — which includes finding the right match for these banks — has already started.

New Delhi: After putting its bank consolidation plan in motion by merging Bank of Baroda, Vijaya Bank and Dena Bank, the government is now looking to amalgamate other ‘weak banks’.

A Finance Ministry official told ThePrint on the condition of anonymity that such banks have been identified and include Allahabad Bank, Andhra Bank, Central Bank, Bank of Maharashtra, Indian Overseas Bank, UCO Bank, United Bank of India and Union Bank.

Several of these banks have been slated for ‘Prompt Corrective Action’ by the Reserve Bank of India, restricting their normal lending business.

Also read: Dena, Vijaya, Bank of Baroda merger: Raising efficiency or burdening performing banks?

‘Cannot afford so many’

In response to the bad loans crisis, Finance Minister Arun Jaitley had said that the government would look to bring down the number of public sector banks from 21 to about just half-a-dozen.

But while Jaitley was on leave for kidney transplant surgery, stand-in finance minister Piyush Goyal had sought the opinion of independent economists on the issue. Sources said the ministry had then decided to go slow on mergers due to the mounting non-performing assets (NPAs) in cash-strapped government banks.

Then, announcing the BoB-Vijaya-Dena Bank merger on 17 September, Jaitley said it would make the banks stronger and sustainable as well as increase their lending ability. He said bank lending was becoming weak, hurting corporate sector investments, and that many banks were in fragile condition due to excessive lending and ballooning NPAs.

“This amalgamated entity will increase banking operations,” he said.

The ministry official said that background work — which includes finding the right match for these banks — has already started.

“Public sector banks are not in the best of financial health, but the government is committed to supporting them to ensure that no lender fails. But at the same time there need to be a few important changes and one of them is merger,” the ministry official said.

“We cannot afford to have so many banks and many of them doing poorly… A few banks have been identified so that they can be amalgamated with others to ensure that they do not lose employees or customers.”

Opposition from unions

Bank unions have now embarked on a stiff protest to oppose the BoB-Vijaya-Dena Bank merger.

The ministry official, however, said there is never a ‘right time’ for a bank merger.

“When banks were doing well, the same unions and employees questioned the need to merge,” the official said.

Also read: Here’s what you can do if your Aadhaar is linked to phone and banks accounts

The government has already announced a recapitalisation package of Rs 2.11 lakh crore to cushion the public sector banks. State-owned banks, according to the plan, will get Rs 1.35 lakh crore through re-capitalisation bonds, while the other Rs 58,000 crore will be raised through capital from the market.

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  1. Good decision. It is required to be properly monitored to ensure there is no time over run . Further chairmen of the banks should be allowed to work independently and appointed and reviewed By RBI. There should be pre determined common yardsticks to review performance of the banks. No interference, review by Govt except common policy directives by finance ministry to all banks including pvt banks. Otherwise the performance may be worsen blaming Bank Administration.

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