The next round of public sector bank mergers is expected to begin soon

14 Jul 2022 , 09:34 AM

After reviewing thorough research that has been commissioned on the results of amalgamation in state-run banks, the government intends to start the next phase of public sector bank mergers, a senior official from the finance ministry communicated to ET.

According to the source who asked to remain anonymous, the goal is to have 4-5 sizable banks that are as sizable and powerful as the State Bank of India (SBI), the nation’s largest lender.

There are currently five minor public sector banks and seven larger ones.

The government declared in 2019 that it would combine 10 nationalized banks into four sizable lenders, reducing the number of public sector banks (PSBs) to 12. In 2017, there were 27 state-run lenders. Beginning in April 2020, the merger was in force.

In a report earlier this week, the National Council of Applied Economic Research (NCAER) argued in favour of privatizing all PSBs other than SBI.

In all of the important performance measures over the past ten years, PSBs have mostly fallen behind private banks, according to the report written by NCAER director Poonam Gupta and economist Arvind Panagariya. It stated that “they have observed soured loans and soaring operational expenditures.” These PSBs have achieved poorer returns on assets and equity than their counterparts in the private sector.

However, the official from the finance ministry claimed that state-owned banks had improved on all key performance metrics in recent years and had more than doubled their earnings in FY22. In the approaching monsoon session of parliament, the government is anticipated to present a bill with revisions to allow for the privatization of state-run banks.