No Current Plans for Public Sector Bank Mergers

The Indian Finance Ministry has made an important announcement regarding the future of public sector banks (PSBs). In a statement delivered in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary confirmed that there are currently no plans to merge any of the PSBs. This statement comes amidst ongoing speculation about the government potentially consolidating the 12 PSBs into larger entities. The aim behind such speculation was to elevate Indian banks to compete globally.

Minister Chaudhary emphasized that no proposals for mergers or consolidations are being considered at this time. This clarification is significant given the discussions surrounding the competitiveness of PSBs. Recent reports had indicated that the government was contemplating merging banks like Bank of Baroda, Bank of India, and others to form larger, more competitive institutions.

At a recent event titled ‘PSB Manthan,’ the Finance Ministry discussed strategies to make PSBs globally competitive by 2047. Currently, only the State Bank of India (SBI) ranks among the top 100 banks worldwide, positioned at 43rd based on assets. The last major consolidation of PSBs took place in 2019, resulting in the amalgamation of 10 banks into four, reducing the total number of PSBs to 12.

In addition to the merger discussions, Minister Chaudhary also addressed concerns regarding the privatization of PSBs. He stated that there are no current proposals for privatizing any PSBs other than IDBI Bank. This is a crucial point as Finance Minister Nirmala Sitharaman had previously suggested the possibility of privatizing two additional PSBs during her budget speech for 2021-22.

Furthermore, the Finance Minister shared that the identity of bidders interested in IDBI Bank cannot be disclosed until the transaction is completed. The process is currently undergoing due diligence, with the shortlisted bidders awaiting security clearance from the Ministry of Home Affairs and evaluation by the Reserve Bank of India.

In summary, while discussions around the future of PSBs are ongoing, the Finance Ministry has made it clear that there are no immediate plans for mergers or privatizations. The focus remains on enhancing the competitiveness of public sector banks to ensure their relevance in a rapidly evolving financial landscape.