Body on PSU bank mergers on anvil

An expert panel will be set up shortly to devise a strategy for consolidation of public sector banks as India needs stronger lenders rather than a “numerically large number” of them, finance minister Arun Jaitley said on Saturday.

He also said the government is considering ESOPs for PSU bank officials besides strengthening the SARFAESI Act and Debt Recovery Tribunals to deal with the problems of stressed assets, which are estimated at around Rs 8 lakh crore in the banking system as a whole.

Addressing a press conference at the conclusion of the second edition of Gyan Sangam, Mr Jaitley stressed banks will have to clear their balance sheets through effective recovery.

He said consolidation of state-owned banks was discussed at the two-day meeting and bankers themselves have suggested that an expert group should be set up to look into the issue.

“We will consider that suggestion,” the minister said, adding that the country needs stronger banks rather than a large number of lenders. Mr Jaitley said consolidation is a Budget announcement and it will get “top-most priority” and the “experts’ group would be constituted immediately”.

The panel, he said, will consider issues like “what is the best course of consolidation, where do you start from, which are the banks to be consolidated, entire issue of consolidation... so that we can have strong banks. There is a weak link in the chain, that is probably what the group would decide”.

The panel would also deliberate whether weak banks should be merged with stronger ones or regional banks. The other idea which was suggested at the meeting was to give PSU employees an employee stock ownership plan (ESOP).

“Government is considering (ESOPs). It is in a very advanced stage...It has been a long-standing demand and is an active consideration,” Mr Jaitley said.