Next Round of Public Sector Bank Merger Coming Very Soon

Government of India, Ministry of Finance has hinted today that next round of Public Sector Bank merger is coming very soon, where few of Public sector bank will be merged for better consolidation. This may be done before the 11th Bipartite Settlement of bank employees. Government also stated that they lost their patience and wanted to consolidate the public sector banking space without waiting for their finances to improve.

State Bank of India (SBI), India’s largest bank already merged the five associate banks and Bhartiya Mahila Bank successfully with better balance book and NPA level. Bankers were in thought that after the SBI amalgamation took place, there will be wait time i.e. after Election of 2019 or till the health of the banks improve. 

Read : Government Hints Merging of Banks to Six

Finance Minister said in an interview that there are some Public sector bank which are under so bad condition that they want immediate consolidation without any waiting time. Government is seriously examine the balance book of these banks. Currently, there are 21 PSU banks in the country, including State Bank of India.

Read : RBI Governor Said – Higher Market Share of Private Banks is Good Sign for PSB Bank Merger

Government already received the positive signal from the Reserve Bank of India (RBI) as RBI Governor Urjit Patel already had hinted that Indian Public Sector Bank needed a must consolidation for improvement in profitability and lower Non performing assets level.He is in favor of fewer but healthier entities, as it would help in dealing with the problem of stressed assets.

Read : RBI Governor Suggests Merging of Public Sector Banks

Non Performing Assets (NPA) level of Public Sector Banks are Rs 6.06 lakh crore during April-December of 2016-17,Majority of these Non Performing Assets (NPA) are from corporate sectors and companies like Telecom, power, steel, road infra and textile sectors.

The possibility of Merging what government are examining are :

Punjab National Bank —–> Merging —–> Punjab & Sindh Bank

Bank of Baroda             —–> Merging —–> Indian Overseas Bank (IOB)

IDBI Bank          ————-> Looking For Privatization

Government is fully prepared to privatize the IDBI Bank, Only the constraint they are facing is large real estate assets of the bank in Mumbai and elsewhere, which are currently the complicated issues to deal with. It is because , without segregating real estate, selling just the banking system which in the present state is not in the best of health due to which process got slowed down a little. The large portfolio of IDBI Bank real estate, which was not taken into consideration during the valuation exercise. Government has sited the example of Axis Bank as IDBI bank after privatization could do well as like Axis Bank or earlier UTI Bank.

Read : Top 6 Public Sector Bank After Merging

In the year ended March 31, 2017, IDBI Bank posted a net loss of Rs 5,158 crore as against net loss Rs 3,665 crore in fiscal 2016. The Gross NPA level of IDBI Bank is almost double i.e. 21.25 per cent of the gross advances in the fourth quarter of the last fiscal compared to 10.98 per cent in the corresponding period of the previous financial year. The net NPAs were 13.21 per cent against 6.78 per cent.