As per a leading business daily report, the government is mulling on the plan to merge 4- state run lenders including Bank of Baroda, IDBI Bank Ltd, Oriental Bank of Commerce and Central Bank of India.
The four entities proposed to be merged are reeling under combined losses to the tune of Rs 21,646.38 crore as on March 31, 2018. In April last year, Urjit Patel said that the Indian banking system shall be in a better position upon consolidation of some of the PSU banks.
Though, at an earlier time, any consolidation or merger was ruled out for the year.This attempt by the government shall be to curb or stall rising NPAs with which these banks are saddled with amid declining demand for corporate credit and also at a time when banks have turned cautious in their lending spree amid stringent RBI guidelines on NPAs.
If the proposed plan is implemented, the merged entity will be the second largest bank in the country with combined assets worth Rs. 16.58 lakh crore.
At the same time, there is a stake sale plan of 51% in IDBI Bank under consideration by the DoFS for as much as Rs. 9,000- Rs. 10,000 crore to a strategic partner.
The proposed merger of these loss-making PSU banks will thus help to reduce overhead cost, sell assets and also close down loss incurring bank branches.
In April 2017, the SBI was merged with five SBI associate banks and Bharatiya Mahila Bank.