On Wednesday, August 23, India’s Union Cabinet approved a proposal to set up a ministerial panel to speed up consolidation of state-run banks as part of its efforts to revive credit and economic growth.
Prime Minister Narendra Modi will name the members of the panel, which will oversee proposals for mergers from the boards of the banks, Finance Minister Arun Jaitley said after a meeting of the federal cabinet.
New Delhi owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in Asia’s third-biggest economy.
But these banks also account for the lion’s share of more than US$150 billion in sour assets plaguing the sector, and need billions of dollars in new capital over the next two years to meet global Basel III capital norms.
Banking sector reforms are a major plank of Modi’s administration to revive credit growth, which has slowed to multi-decade lows as banks struggle with bad loans.
After top lender State Bank of India merged with its five subsidiary banks and also took over a niche state-run lender for women earlier this year, officials have said that more deals are being planned.
“The object is to create strong banks,” Jaitley told reporters, adding decisions would be solely based on “commercial considerations”.
Full Content: Manorama Online
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