India: Large public sector lenders asked to consider mergers

The finance ministry has asked four big lenders to explore the possibility of merging with smaller banks, as the government moves to consolidate public sector banks, a senior finance ministry official told BloombergQuint on the condition of anonymity.

The government has picked relatively stronger lenders including Punjab National Bank, Bank of Baroda, Bank of India and Canara Bank as possible acquirers in this process of consolidation, said the official. The banks have already made presentations to the government on whether they are in a position to merge with smaller banks and the synergies that various combinations may throw up.

Last year, the government approved the merger of State Bank of India with its remaining five associate banks. The consolidation process went smoothly with the merger taking effect from April 1. In an interview to Bloomberg News earlier this month, Finance Minister Arun Jaitley said that the government would be contemplating a few more bank mergers following the merger of SBI with its associates.

The process appears to have been kick-started already even though there is no clear timeline for such mergers.

Banks have been asked to explore issues such as overlap of branches, technical integration and whether there would be anti-competition concerns that could emerge, said the official quoted above. The objective would be to ensure that the exercise does not turn out to be counterproductive, the official said.

Full Content: Bloomberg

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