INSUBCONTINENT EXCLUSIVE:
banks have been asked to be ready with their consolidation plan so that it could be placed before the alternative mechanism (AM) of the new
government as soon as it is formed, official sources said
The next wave of bank consolidation is planned in the October-December quarter of the current fiscal year, they added.The Ministry of
Finance has started to seek information from public sector banks on possible targets for amalgamation/mergers and acquisitions with
justification on how such an initiative will synergise operations and strengthen the bank.The AM or alternative mechanism, or a group of
ministers under Finance Minister Arun Jaitley, was created in 2017 to fast track consolidation, and help create strong and competitive
banks, serving as catalysts for growth, with improved risk profile and one that can exploit economies of scale."The next round of bank
consolidation may take place in the third quarter of FY20 as enough room has to be given to PSU banks to correct their balance sheets (in
the first half of current fiscal) before embarking mergers as only this would ensure that resultant entity is strong and credible," said the
source quoted above.Last year, the alternative mechanism approved the proposed merger of Vijaya Bank and Dena Bank with Bank of Baroda,
which came into effect on April 1, 2019
In 2017, the State Bank of India absorbed five of its associates and the Bharatiya Mahila Bank.This year, the consolidation exercise is
expected to revolve around Punjab National Bank (PNB) to take some smaller PSU banks under its ambit
The names of Syndicate Bank, Oriental Bank of Commerce, Andhra Bank and Allahabad Bank are being considered for the merger.However, a final
call would be taken only after both acquirer and the target bank come up with their respective proposals to the finance ministry.Sources
said the move would add muscle to a big bank like PNB, which has just emerged from a dark phase of fraud by diamond merchant Nirav Modi and
also has posted profits.There is also buzz that banks such as Union Bank of India and Bank of India may be called upon to give their views
on the exercise.In March this year, there was also talk of a merger of PNB, Syndicate Bank and Indian Overseas Bank
Before that speculation was rife about a possible merger of all Delhi-headquartered banks: PNB, Punjab Sind Bank and Oriental Bank of
Commerce.The government has been nudging the state-owned lenders to go for a merger, so that there can be fewer and stronger banks.The
finance ministry wants banks to undertake an internal exercise for the best match and then come up with the merger idea
This plan would have to weigh various aspects including regional balance, geographical reach, IT compatibility, financial burden and human
