The finance ministry sees a scope of merger among 3-4 more public sector banks — in what could be the second wave of consolidation in the banking sector.There have been a number of discussions on possible mergers but these are really at initial stages. Ultimately, it is the government which has to take a call on these and we can only look to implement it,” a senior executive at the Punjab National Bank said on condition of anonymity, without divulging any further details.
Last month, the RBI Governor Urjit Patel said in New York that the banking system in India could be better off if some public sector banks are consolidated so as to have fewer but healthier entities.
Patel had also said that consolidation of banks could also entail sale of real estate where branches are redundant as well as offering voluntary retirement schemes to manage headcount and adding younger, digital-savvy personnel.
Country’s largest lender State Bank of India has completed the process of merging State Bank Of Bikaner & Jaipur, State Bank Of Hyderabad, State Bank Of Mysore, State Bank Of Patiala and State Bank Of Travancore and Bharatiya Mahila Bank with itself. In the next leg of consolidation, while a merger among relatively strong banks is likely, weak banks are expected to shrink in their size. This is expected to reduce the pressure on the government of providing capital to the banks. In 2015, Centre launched the Indradhanush programme, to infuse Rs 70,000 crore into public banks. The government estimates that public banks would require about Rs 1.8 lakh crore of capital. This year Centre will put in Rs 10,000 crore into public banks.
By summing up all, I can say that it would lead to the unemployment of workforce who are currently employed to the banks. Instead of merging banks, the government need to search for some other way to rescue. This will hamper the financial system of economy. This would be better stopped.