In a bid to strengthen the banking system laden with bad debt, the government has asked the Reserve Bank of India to prepare a list of public sector banks that can be merged.
The finance ministry has also asked the central bank to suggest a timeframe for the consolidation. The move is aimed at creating better capitalised and fewer lenders and improving regulatory oversight.
Government-controlled lenders are estimated to be holding 90 percent of the non-performing loans and 11 out of the 21 PSBs are operating under PCA.
Reserve Bank of India said today that banks will witness further deterioration in their non-performing assets due to the "economic situation prevailing" in the current fiscal.
As per RBI's Annual Report 2017-18, gross non-performing assets (GNPAs) plus restructured standard advances in the banking system remained elevated at 12.1 per cent of gross advances at end-March 2018.
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