If all goes well with the plan, the merged entity will become the second-largest bank in nation after SBI, with combined assets of INR 16.58 lakh crore
The Hush Post: According to a report, government is considering to merge at least four state-run banks, which include Bank of Baroda, IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India.
If the plan sails through, the merged entity will become the second-largest bank in the country after State Bank of India, with combined assets of INR 16.58 lakh crore.
Government has been indicating consolidation in the banking sector over the last one year or more. They indicated doing so by reducing the number of banks by merging or closing down some of the loss-making smaller public sector banks.
The four banks listed that are being proposed to be merged are under pressure with combined losses of INR 21,646.38 crore in the year ended March 31, 2018.
The merger is an attempt by the government to help stem the rise in bad loans or non-performing assets (NPAs) in their books. This comes at a time when corporate demand is weak and banks are being cautious on further lending in wake of stricter central bank guidelines in case of a default. The merger will also allow the weak banks to sell assets, reduce overheads and shut money-losing branches.
The department of financial services, under the Finance Ministry, is also simultaneously considering a 51 per cent stake sale in IDBI Bank to a strategic partner, for INR 9,000-10,000 crore; a report quoted citing unnamed sources.
“Dilution of (government) stake in IDBI Bank could also be achieved through stake sale to private equity investors,” it added.