Panel Set Up to Find Out Banks for Merg­ers

It will look into fac­tors such as ge­og­ra­phy, tech plat­form, hu­man re­source is­sue re­lated to con­sol­i­da­tion

The Economic Times - - Economy: Macro, Micro & More - Dheeraj.Ti­wari@ times­

New Delhi: A 10-mem­ber com­mit­tee is be­ing set up by the gov­ern­ment to iden­tify suit­able can­di­dates as it seeks to push con­sol­i­da­tion among state-run banks, which num­ber 27 in­clud­ing five sub­sidiaries of State Bank of In­dia.

The pro­posed com­mit­tee will have se­nior ex­ec­u­tives along with rep­re­sen­ta­tion from the Re­serve Bank of In­dia, a fi­nance min­istry of­fi­cial said. “The idea is to iden­tify can­di­dates for both merg­ers and ac­qui­si­tions. There are some banks which had in the past evinced in­ter­est to take on smaller en­ti­ties, so that will also be dis­cussed,” the of­fi­cial said, re­quest­ing not to be iden­ti­fied.

Ear­lier this month, fi­nance min­is­ter Arun Jait­ley had told ET that there is po­lit­i­cal will in the coun­try for pro­fes­sion­al­is­ing the man­age­ment of public sec­tor banks, go­ing in for con­sol­i­da­tion, hav­ing board-gov­erned banks and more com­pe­ti­tion from pri­vate sec­tor, and run­ning state-run banks as pri­vate sec­tor en­ti­ties. The pro­posed com­mit­tee will also look at merg­ers from the per­spec­tive of cre­at­ing one or two large banks by merg­ing smaller banks.

“Any con­sol­i­da­tion among public sec­tor banks has to be done keep­ing in view fac­tors such as ge­og­ra­phy and tech­nol­ogy plat­form, be­sides hu­man re­source is­sues. The com­mit­tee will look into th­ese mat­ters,” the of­fi­cial said.

Jait­ley had said in March af­ter the sec­ond an­nual bank­ing con­clave, Gyan Sangam, that as part of the strat­egy for con­sol­i­da­tion of banks, an ex­perts’ group would be con­sti­tuted im­me­di­ately to look into all the is­sues. “The bankers’ them­selves have sup­ported the pro­posal of con­sol­i­da­tion of banks in or­der to have strong banks rather than hav­ing nu­mer­i­cally large num­ber of banks,” he had said.

The lat­est M&A trans­ac­tion in public sec­tor banks was the takeover of State Bank of Indore by State Bank of In­dia in 2010. SBI took over State Bank of Saurash­tra in 2008. “In the past se­nior man­age­ment of the banks, and the unions also, have been re­luc­tant on con­sol­i­da­tion, so the gov­ern­ment should set up a time frame for the com­mit­tee to give rec­om­men­da­tions,” a se­nior ex­ec­u­tive of Pun­jab Na­tional Bank said.

The panel will also look at cre­at­ing one or two large banks by merg­ing smaller banks

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