Economy

Govt sets alternative mechanism for consolidation of PSBs

Govt sets alternative mechanism for consolidation of PSBs”

India has set up a panel headed by Finance Minister Arun Jaitley to evaluate proposals for mergers among state-run banks, the government said on Wednesday, taking the long-awaited move a step forward.

"The proposals received from banks for in-principle approval to formulate schemes of amalgamation will be placed before the AM".

The other members of the panel include Railways and Coal Minister Piyush Goyal and Defence Minister Nirmala Sitharaman. "A Report on the proposals cleared by AM will be sent to the Cabinet every three months", it said.

"'The decision to create this 'alternate mechanism" would facilitate consolidation among nationalised banks to create strong and competitive banks, ' the government had then noted in its statement.

"It shall devise its own procedure for appraisal of amalgamation proposals by banks, and be guided overall by the objectives of the Nationalisation Acts {Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980}", the statement said.

The Union Cabinet in August had chose to set up an Alternative Mechanism to fast track consolidation among public sector banks to create strong lenders.

In a stimulus package aimed to boost flagging economic growth, create jobs and increase credit flow, the cabinet last week approved a Rs 2.11 lakh crore recapitalisation plan for state-run banks and massive road infrastructure investment of almost Rs 7 lakh crore over five years.

Last week, the government announced a $32 billion recapitalisation plan for the state lenders over the next two years to help resolve their bad loans and meet higher capital ratios required under Basel III global banking rules. The panel will be serviced by the Department of Financial Services for this objective.

Though it was only in May 2016 that effective action to consolidate state-owned banks struck headlines with six associate banks getting merged into State Bank of India in April 2017.



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