Central Government decided to lower number of public sector banks to 10-15: FinMin advisor

Highlights: 

  • According to the latest report from Finance Ministry, India will have 10-15 public sector banks with government's majority stake, down from 21 at present, as part of its plan to consolidate banks.
  • Te main purpose is to clean up of the bad loan problems is the first priority and after that the PSU banks could be consolidated.
  • As part of the clean up process, the RBI has already started recognising the bad assets, provision them and is taking some of them to bankruptcy and insolvency process.
  • Recapitalisation bonds is one of the options for infusing capital into banks, he said, adding that the government could also dilute its stake in some lenders to 52%.
  • In the last consolidation drive, five associate banks and Bharatiya Mahila Bank (BMB) became part of State Bank of India (SBI) on April 1, 2017, catapulting the country's largest lender to among the top 50 banks in the world.
  • State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides BMB, were merged with SBI.
  • As per S&P Global Ratings, PSU banks will need at least Rs 1.9 lakh crore additional capital by March 2019 as the lack of it will restrict their ability to write down non-performing loans.