Second round of merger may start soon as government may invite Punjab National Bank, Union Bank of India and Bank of India to discuss the merger of public sector banks according to a report by Economic Times quoting a Finance Ministry Official..

“We wouldn’t like to wait for too long. If the banks are not able to provide options, then the alternate mechanism (AM) group can make suggestions,” the official told the newspaper. He hinted there could be a merger in the second or third quarter of the current fiscal.

Merger of Vijaya Bank and Dena Bank became effective from 1at April 2019, process for which was started in October last year. With this merger, Bank of Baroda became 3rd largest bank in India, behind SBI and ICIC Bank .

However, the official said the second merger does not have to involve three parties. “We will be looking at various combinations. It has to be organic. Besides, we will like some of these large banks to further consolidate their balance sheets in the first two quarters,” the official told the newspaper.

BoI has just emerged from the Reserve Bank of India’s (RBI) prompt corrective action (PCA) framework.

The other two, PNB and UBI, are also in recovery stages.

Mergers are not the answer to every problem in the banking sector and the government should open itself to alternatives other than creating too-big-to-fail structures, a senior executive at a public sector bank told the newspaper.
[Source : Economic Times and Moneycontrol]