RBI Governor Said – Higher Market Share of Private Banks is Good Sign for PSB Bank Merger

What could be the worst for public Sector Bank if RBI itself has decided the faith of Government Public Sector Banks ? RBI governor today advocated the merger of larger Public sector banks and said that it’s a good sign that Private bank are gaining market share. It is a good sign that the weaker banks are losing market share. This would help them to merge with larger entity silently. He also said that 

I think there is a nice shift happening and we need to work with that to resolve this.

He advocated that some of these banks can be merged in return for government assistance in taking care of the NPA problem and this would also make them more efficient. The merger of banks would lead  to save the younger, digital-savvy personnel and hiring can be made further to expand digital banking operations.

ReadRBI Governor Suggests Merging of Public Sector Banks

He further said that Improved market valuations would create an opportune time for the government to divest some of the ownership in the restructured banks and this would reduce the overall amount that the government needs to inject into them to deal with the NPA problem.

He further added many of points to justify his statement

  1. Lenders who are stronger are gaining more market share. I think there is a nice shift happening and we need to work with that to resolve this.
  2.  Divestment in public sector banks would have a positive role for the sector. 
  3.  Divestment measures would improve overall banking sector health
  4.   The materialization of reforms in the form of roll out of the GST, the institution of Indian Insolvency and Bankruptcy Code and the abolition of the Foreign Investment Promotion Board (FIPB) should boost investor and investment confidence.
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