Asking the state-owned banks to seriously look at mergers and acquisitions, the government today said it would support consolidation of the public sector banks (PSB) to help them become globally competitive.
"The PSBs should look at consolidation as a serious option in order to reduce risk to financial stability and to face competition," Finance Minister Pranab Mukherjee told reporters after meeting the heads of public sector banks and financial institutions.
Besides State Bank of India (SBI) and its six associate banks, there are 20 nationalised banks in the country. The larger ones include Punjab National Bank, Canara Bank, Bank of Baroda and Bank of India.
Pointing out that the initiative for merger should come from the management of the banks, Mukherjee said, "Any consolidation initiative in the banking sector would be viewed positively and the government, as a majority shareholder, would continue to play a supportive role."
Commenting on Finance Minister's assertion, Chairman of the largest bank SBI O P Bhatt said, "We are looking at it (merger of associate banks) constantly. Now new government is there... We will formulate our views within next month or so with regard to consolidation."
"Once we get signals (from government), process will not take more than three to six months," Bhatt added.