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Finance Minister Nirmala Sitharaman emphasized on the process of talks with RBI and bank merger for big banks in SBI Banking and Economics Conclave, IDBI Bank privatization was also in discussion.
New DelhiIndia needs big and world class banks and the government is in talks with RBI to make this possible. Finance Minister Nirmala Sitharaman hinted towards the merger of public sector banks by saying this in the 12th SBI Banking and Economics Conclave on Thursday. He said these things in response to a question asked by CNBC-TV18 journalist Shireen Bhan. The question was, “Is the government looking at consolidation of existing banks to create bigger banks. Also, is it being considered to increase the FDI limit in public sector banks to 49 percent?”
On this, the Finance Minister said, “I will say again that India needs many big and world class banks. For this we will have to sit and talk with the RBI and the concerned banks. It will have to be seen what ideas the RBI has for setting up big banks. So before saying anything about the consolidation of banks, a lot of things have to be done, and this work has already started. We are talking with the banks and the RBI.”
Just merging banks is not enough
However, the Finance Minister also said that the only way to create big banks is not to merge the existing small banks together. He said that this could be just one way. According to the Finance Minister, instead of just merging the banks, there is a need to create an environment for their growth and development. She said that such is the environment in India but she wants it to be more dynamic.
Bank mergers continue
In order to create bigger and stronger banks, the government has merged many banks in the last few years. Till now, bank consolidation has been done in two big rounds. In August 2019, the government had announced the merger of four big banks, due to which there were 27 government banks in 2017, now their number has come down to only 12. This merger came into effect from 1 April 2020. In this, United Bank of India and Oriental Bank of Commerce were merged into Punjab National Bank. Syndicate Bank was merged into Canara Bank, Allahabad Bank into Indian Bank, and Andhra Bank and Corporation Bank were merged into Union Bank of India.
Earlier in 2019, Dena Bank and Vijaya Bank were merged into Bank of Baroda. In 2017, to strengthen the State Bank of India, the government merged its five associate banks and Bharatiya Mahila Bank.
Privatization of IDBI
Apart from this, the government had sold its 51 percent stake in IDBI Bank to Life Insurance Corporation of India (LIC) in January 2019. Later, the government and LIC together planned to sell their stake in this bank. In October 2022, both of them together sought proposals (Expression of Interest) from investors for the privatization of IDBI Bank. Under this plan, it was said that a total of 60.72 percent stake would be sold, which includes 30.48 percent stake of the government and 30.24 percent stake of LIC.
