Govt to reduce number of PSBs to 10-15: Finance Ministry

The finance ministry is mulling reducing the number of public-sector banks (PSBs) in India by merging some of the banks, the finance ministry’s principal economic advisor Sanjeev Sanyal said.

He said the ministry would begin the process of bank mergers once the task of setting right bad loans was taken care of.

Currently, there are 21 PSBs in the country. This number would come down to 10-15, he said, adding there will not be a drastic reduction as it would lead to a larger problem of concentration of risks with a single bank.

“We recognise that bringing down the numbers drastically to four or five PSBs will lead to too many ‘too-big- to-fail’ banks. Currently, we have one large bank, State Bank of India. We do not want to create similar structures,” Sanyal said.

Speaking at the India Economic Summit, he said recapitalisation of PSBs was a more urgent issue, which the ministry would focus on resolving.

Regional balance, geographical reach, financial burden and smooth human resource transition would be some of the factors of consideration, apart from ensuring that a weak bank will not be merged with a strong one as it could bear an impact on the latter, Sanyal observed.


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