Government steps forward to support public sector banks to merge

14-Dec-2009

Indian Finance Minister Pranab Mukherjee stated  that Government will support public sector banks to  merge, provided they fulfilled RBI and SEBI (Securities and Exchange Board of India) guidelines. “If someone decides to merge, if we see it is in conformity  with our policy and if we find that parameters are being followed as per the SEBI and RBI guidelines”, then government would play a “supportive role”, he said in reply to a calling attention in the Lok Sabha. “The current policy of the government on consolidation  leaves the initiative for consolidation to come from the  management of the banks themselves, with the government  playing a supportive role as the common shareholder,” he said,  asserting that no directive on consolidation was being issued  by the government or the RBI. The boards of the banks have to take a decision in this  regard “based on the synergy levels of merging or consolidating entities”, he said. The attention motion was moved by CPI leader Gurudas  Dasgupta who asked whether the government had taken any  initiative “overtly or covertly” to merge various public sector banks resulting in “discontent” amongst the bank employees. Dasgupta gave the example of the move for merger of State  Bank of India and State Bank of Indore. He also said the move was being opposed by the Madhya Pradesh government. He pointed out that there was no government interference in the normal day-to-day financial and commercial activities of the  state-owned banks, he said, “We are giving them managerial  autonomy. We cannot give them a directive that doesn’t merge.” Mukherjee said consolidation was a “continuous process” as  mergers had occurred during “every regime”. Mentioning that the banking system had “undergone major  changes” since nationalization, he said the State Banks of  Travancore-Cochin, Bikaner and Saurashtra were doing a  “good job” and were being optimistic to do better. Dasgupta said mergers would not only lead to monopoly  and lower competition in the banking sector, it would also lead to dropping access to banking for the greater part of people. Source: Live Mint