Nirmala Sitharaman lists out PSU banking improvements under Modi govt; may announce major merger

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The meeting with the bankers will  took place at 2 pm today.

Taking the PSB merger agenda of the last government further, Finance Minister Nirmala Sitharaman met chiefs of public sector lenders on Friday. Highlighting the major improvements under the Prime Minister Narendra Modi government in banking sector, Nirmala Sitharaman said that the reforms have helped the banks to recover from the pressure by NPAs in the last few years. The reforms have boosted the banking economy and recurrence of the past weakness is now unlikley, she added.

Indian Bank, OBC, Corporation Bank are some of the banks called for the meeting today, the report added. In the previous term of the Modi government, five associate banks and Bharatiya Mahila Bank were merged with State Bank of India. SImilarly, Dena Bank, Vijaya Bank merged with Bank of Baroda which came into effect from April 1, 2019. According to the Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980, the government must consult the Reserve Bank of India (RBI) before planning of merger plan.

Notably, former Finance Minister Arun Jaitley has promoted the idea of consolidation in the public sector banks to make them globally competitive and better players in the banking space. “I think India needs fewer and mega banks which are strong because in every sense, from borrowing rates to optimum utilisation, the economies of scale as far as the banking sector is concerned are of great help,” Arun Jaitley had said in February this year.

In May this year, global news agency Reuters had reported that the new government may look to merge government run Punjab National Bank with two other PSU banks including Oriental Bank of Commerce, Andhra Bank and Allahabad Bank after the elections. The government plans to do such to limit the number of state run banks to 5-6 in the country, the report added.