India

Govt plans more SBI-like mergers to create global-sized banks

10 Jun 2017 | By Anish Chakraborty

Reports say that the Finance Ministry is now planning to replicate the success it has made with SBI's merger with its five associate banks and Bharatiya Mahila Bank.

The merger had propelled the state-run lender among the top 50 banks worldwide and the Indian public sector banking space could do with another bank at par with global behemoths.

Here's all about it.

In context: Govt plans to achieve merger goal by year-end

10 Jun 2017Govt plans more SBI-like mergers to create global-sized banks

MoveIt's the need of the hour

A senior banking official was quoted saying that under present circumstances consolidation is a must, but a proper decision can only be made based on commercially advisable parameters; chances are ripe that another merger will take place by the end of the current fiscal.

FinMin Arun Jaitley had echoed the same sentiments earlier, saying that India needs to have more global scale banks.

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ActThere are several factors at play

In case there is a merger via consolidation; it would be a balancing act, considering it has to be formulated in such a way that it turns out to be a win-win situation for all the parties involved in the exercise.

It can only go ahead after it has been agreed upon by stakeholders and various regulators, which makes it a long-term process.

MonopolyChances of creating a monopoly

A merger of such scale will also need a clearance from the Competition Commission of India (CCI), which will judge if the merged entity poses a threat to the banking sector by creating a monopoly in its wake.

In SBI's merger, only Bharatiya Mahila Bank (BMB) needed CCI nod; others didn't, as they were a part of the parent bank.

ProjectFinMin has put NITI Aayog to the task

FinMin has asked help from the government think-tank NITI Aayog and several other global consultancy firms to find out what is needed to proceed with its plan of creating Indian lenders able to compete on a global scale.

NITI Aayog will collate factors, such as balancing regional aspects, geographical reach, monetary burden and proper personnel transition, and submit its report soon.