India: Gov is reportedly planning fresh bank consolidation

The next wave of bank consolidation is planned during the October-December quarter of the current fiscal with the Finance Ministry starting to seek information from PSBs on possible targets for amalgamation/mergers and acquisitions with justification on how such an initiative will synergise operations and strengthen the bank.

Government sources said that heads of all public sector banks (PSBs) have been asked to be ready with their consolidation plan so that it could be placed before the alternative mechanism (AM) of the new government as soon as it is formed.

The AM, or a group of Ministers under former Finance Minister Arun Jaitley, was created in 2017 to fast track consolidation and help create strong and competitive banks, serving as catalysts for growth, with improved risk profile and one that can exploit economies of scale.

“The next round of bank consolidation may take place in the third quarter of FY20 as enough room has to be given to PSBs to correct their balance sheets (in the first half of current fiscal) before embarking mergers as only this would ensure that resultant entity is strong and credible,” said the source quoted above.