Guidelines for Merger of Banks in India – Union Government has announced that the framework along with guidelines is finalized for consolidation & Merger of public sector banks. Finance minister Arun Jaitely has informed the media about the proposed decision and told that the decision was taken at the Cabinet meeting. Mr Arun jaitely stated that the consolidation would enable in Quick decision making in commercials. Earlier in the month the minister of state, Finance ministry has replied in the parliament where he stated that Government Says “No Merging Of Public Sector Banks” this year.
This was the call taken by Government based on the suggestion given by State Bank of India chairman Arundhati Bhattacharya who called for more consolidation among the public sector banks. The reason given for consolidation of PSB’s was reduction in their dependence on government for capital.
There will be a committee who takes the decision for merging of Public Sector Banks.The constitution of the committee would be made by the Prime Minister.
Mr. ArunJaitely stated that “The cabinet approved the constitution of an alternate mechanism that will oversee proposals with regard to consolidation of banks, which will come from the PSBs (public sector banks)”. he further added that “If any other PSB board gives a consolidation proposal, to oversee that proposal an alternative mechanism will be in place to give in principle approval for the proposal of the banks for a scheme of amalgamation,”. He also said that “The decision regarding creating strong and competitive banks will be solely based on commercial considerations,”. He also added that Our experience of consolidation has been positive. It increases the entity’s commercial strength, the ability to absorb market shocks.