PSB consolidation block for a USD 5 trn economy: secy finance

New Delhi, September 1 () The government's decision to consolidate 10 public sector banks (PSBs) into four mega state lenders will act as a basic component to achieve the USD 5 billion economy objective, said Finance Secretary Rajiv Kumar

To support the next level of growth, the country needed large banks. The mega merger announced on Friday aims to achieve that goal. We will now have six mega banks with an improved capital base, size, scale and efficiency to support the high growth that the country requires to enter the club of middle-income nations, he said in an interview.

Consolidation will help create strong and competitive banks globally with economies of scale and allow for the realization of powerful synergies, he said, adding that they would now have greater reach, greater lending capacity and better products and technology to serve The customers of the new India.

When asked about the roadmap for the future, he said that the banking sector would be technology driven, clean, responsive and that none of the stakeholders in the gaming system in the financial sector space would be auditors, agencies qualification, creditors, or bankers All banks well capitalized and well provided to support the economy of USD 5 billion.

State banks can now expect efficiency gains, higher profits, better services for customers and also more benefits for their employees, he said.

For larger banks, he said, the government has provided capital 0.25 percent higher than required, taking into account its systemically important status.

In addition, he added, Indian banks have a basic capital requirement that is 1% higher than Basel III standards.

On the effective date of the merger, he said it would be resolved after consulting with the respective banking boards as had happened in the case of the Baroda Bank.

There is a process that must be followed. There are some regulatory approvals that are necessary. Banks have enough time to chart a smooth and uninterrupted amalgamation date. It could occur from January 1 or April 1, depending on its availability. later than April 1, he said.

During the interim period, he said, credit growth will not stop and there will be no interruptions for customers.

When asked about the reason for doing the four mergers together, Kumar said: We wanted to do it once, give the road map and eliminate uncertainty. Now there is no uncertainty and the road map is all clear. Governance reforms made. Who wants to give his power, we have given it. Even in the quotes we have given it. Now he is fully professionalized.

Kumar, who spearheaded the banking sector cleaning exercise, has several firstfruits to his credit. These include the highest capital infusion in banking history and the successful completion of the first three-way merger with Bank of Baroda as the anchor bank.

As a result of a series of initiatives taken by the Ministry of Finance, the banking sector witnessed a reversal in the deterioration of the bad loans situation with the reduction of NPA in 1.06 lakh crore and the record loan recovery of Rs 1.21 lakh crore in the last fiscal year.

The cleaning exercise carried out by him has now begun to show results with 14 banks out of 18 publishing profits in the first quarter of the current fiscal year.

The government announced on Friday a mega plan to merge 10 public sector banks into four as part of plans to create smaller and stronger lenders worldwide, as it seeks to boost economic growth from a minimum of more than six years.

Finance Minister Nirmala Sitharaman, who had announced last week the taxes and measures for sectors such as the car industry, announced four new merger sets: Punjab National Bank, Oriental Bank of Commerce and United Bank of India will combine to form the second largest country in the country. lender; Canara Bank and Syndicate Bank will merge; Union Bank of India will merge with Andhra Bank and Corporation Bank; and Indian Bank will merge with Allahabad Bank.

The exercise, seen together with the previous two rounds of bank consolidation, will reduce the number of nationalized public sector banks to 12 of 27 in 2017. Prior to the merger of BoB this year, the government had experience in State Bank, which had merged five of its partner banks: State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad and also Bhartiya Mahila, effective since April 2017. DP CS MKJ