PSU Bank merger proposals may announce on February 1 -2018 by Arun Jetly

As fixing the banking crisis seems to be a top agenda for the government, Finance Minister Arun Jaitley may choose the Budget presentation day, February 1, to announce bank merger proposals, CNBC-TV18 reported quoting an unidentified official. The Finance Ministry expects major mergers between Public Sector Banks (PSBs) early next fiscal.

On November 1, Arun Jaitley- headed a ministerial panel on consolidation of PSU banks has been empowered to direct lenders to examine proposals for amalgamation. Last month, Arun Jaitley speaking at an event said that bank recapitalisation will be among the top three priorities for the government for the fiscal year 2018-19.

The Finance Minister headed Alternative Mechanism (AM) will receive inputs from the Reserve Bank of India (RBI) before according in-principle approvals. The AM would devise its own procedure for appraisal of amalgamation proposals by banks, and be guided overall by the objectives of the Nationalisation Acts [Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980], PTI reported.

The Union Cabinet in August had decided to set up an Alternative Mechanism to fast-track consolidation among public sector banks to create strong lenders.

While announcing the unprecedented Rs 2.11 lakh crore capital infusion roadmap for the public sector banks last month, Jaitley had said, this will be accompanied by a series of banking reforms over the next few months. The government last week also sought parliamentary nod for additional Rs 80,000 crore bonds for bank recapitalisation, which was approved by the Lok Sabha the same day.

Last week, the Finance Ministry approved a capital infusion of Rs 7,577 crore in six weak PSBs as part of its Indradhanush bank recapitalisation plan to boost their capital adequacy ratio. All the six banks are those banks that been put under Reserve Bank of India’s watch for high non-performing assets (NPA). These banks are Bank of India, IDBI Bank, Central Bank of India, Dena Bank, Bank of Maharashtra and UCO Bank.

Under the Indradhanush Plan, the government allocated Rs 70,000 crore for four years — Rs 25,000 crore each for FY 15-16 and 16-17 and Rs 10,000 crore each for 17-18 and 18-19.