New Delhi, July 19: In a bid to reduce the number of state-owned lenders and create 3-4 global-sized banks, the government is working on a consolidation agenda. The major focus of the government is to create 3-4 global-sized banks like the size of State Bank of India (SBI) and reduce the number of state-owned lenders to about 12. An official was quoted by PTI saying that the 21 public sector banks would get consolidated to 10-12 in the medium term and as part of a three-tier structure, there would be at least 3-4 banks of the size of SBI which is the country’s largest lender.

The official further added saying that some region-centric banks like Punjab and Sind Bank and Andhra Bank will continue as independent entities while some mid-size lenders would also co-exist.  Union Finance Minister Arun Jaitley had said in the last month that the government is “actively working” towards consolidation of public sector banks but declined to provide details, saying this was a price-sensitive information. As per details by PTI, enthused by the success of SBI merger, the finance ministry is considering clearing another such proposal by this fiscal if bad loan situation comes under control by then.

As per details by Zee Business, United Bank and P&S bank would merge into Bank of Baroda. Meanwhile, Indian Overseas Bank, Syndicate Bank and UCO Bank will merge into Canara Bank. The Zee Business report further states that IDBI Bank, Central Bank and Dena Bank will all merge into Union Bank while Andhra Bank, Bank of Maharashtra  and Vijaya Bank will merge into  Bank of India

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In February, the government had approved the merger of these five associate banks with SBI. Later in March, the cabinet approved the merger of BMB as well. SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with it. While taking a merger decision, factors like regional balance, geographical reach, financial burden and smooth human resource transition have to be looked into. It has to be noted that a very weak bank should not be merged with a strong one “as it could pull the latter down. Former RBI governor C. Rangarajan was quoted saying that the system will have some large banks, some small banks, some local banks and so forth. “What is needed in the system is variety,” Rangarajan was quoted by PTI.

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Reports state that in the last consolidation drive, five associate banks and Bharatiya Mahila Bank (BMB) became part of SBI on 1 April, 2017, catapulting the country’s largest lender to among the top 50 banks in the world. State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides BMB, were merged with SBI, PTI mentioned in its report.  With the merger, the total customer base of SBI reached around 37 crore with a branch network of around 24,000 and nearly 59,000 ATMs across the country. It has to be noted that the merged entity began operation with deposit base of more than Rs26 trillion and advances level of Rs18.50 trillion. (ALSO READ: IBC: Banks to set aside Rs 18,000cr in FY18, expect 25% profit dip)

The Parliament was informed on Tuesday that 9 of the 21 public sector banks, including IDBI Bank and Indian Overseas Bank, reported losses during 2016-17 while as many as 13 state-owned banks had reported losses during the 2015-16 financial year.  As per details by Minister of State for Finance Santosh Kumar Gangwar in Rajya Sabha on Tuesday,  IDBI Bank had reported a loss of Rs 5,158 crore in the last fiscal, while the amount was Rs 3,417 crore in the case of Indian Overseas Bank. Other loss making state-owned banks were Allahabad Bank, Bank of India, Bank of Maharashtra, Central Bank of India, Dena Bank, Oriental Bank and UCO Bank.