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Saturday, April 9, 2016

Banks bureau to chart PSB mergers, says Jayant Sinha

The issue of consolidation of public sector lenders has come to the fore with Union minister of state for finance Jayant Sinha stating that the Banks Board Bureau would draw a road map for mergers. The bureau, headed by former comptroller and auditor general Vinod Rai, held its first meeting in Mumbai on Friday attended by RBI governor Raghuram Rajan.

There are 19 nationalized banks and several other public sector lenders, which include State Bank of India and its associates, IDBI Bank and Bharatiya Mahila Bank. On Friday, there was speculation among bankers that the government was looking at shrinking the number of banks to seven to 10.
The government is pushing ahead with PSU bank reform as they are rapidly losing value. On Thursday, Equitas Holdings - a micro finance company that has received licence to set up a small finance bank - saw its IPO oversubscribed 16 times, valuing the company at Rs 3,700 crore. At this price, the yet-to-be-launched bank is worth more than eight of the nationalized banks, which include mid-sized lenders such as Bank of Maharashtra, Allahabad Bank, United Bank of India and Andhra Bank.


The government wants to consolidate banks for two reasons. One, it wants several bigger banks that can keep pace with demands of the economy. Second, it wants to discontinue pouring more money into inefficient banks but does not have a choice. Consolidation is one way of ensuring that capital goes to the efficient banks and the weaker banks merge.
The bureau is ultimately expected to be replaced by a holding company for all the public sector banks. Until the legislation is in place, the bureau will perform the job of the holding company, deciding on policy matters and appointments.


Besides Rai, bureau members include ICICI Bank's former joint MD H N Sinor, Bank of Baroda's former chairman A K Khandelwal and ratings agency veteran Rupa Kudwa, now MD of Omidyar Network India Advisors, were present. Ex-officio members of the board included Ameising Luikham, secretary of Department of Public Enterprises, and R Gandhi, deputy governor, RBI.

1 comment:

Unknown said...

CONSOLIDATION OF BANKING SECTOR IS NEED OF THE HOUR

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