The government is likely to kick off an exercise to merge some of the public sector banks to create a few big banks on the lines of the Narasimham Committee recommendations.
According to senior bankers, the finance ministry is looking at merger between a north-based bank and a south-based bank.
In order to avoid complexities, this merger will take place between two unlisted banks.
The unlisted public sector banks in south include Canara Bank, Indian Bank and Vijaya Bank, while the unlisted north-based banks are Punjab National Bank and Punjab & Sind Bank.
The other unlisted banks across the country include Central Bank of India, Union Bank of India, Allahabad Bank, Uco Bank and United Bank of India.
Sources said that the ministry is likely to merge two of the strongest banks. The indications are that it could be a merger between PNB and Canara Bank.
If the merger goes through, this merged entity would become the second largest bank in the country overtaking the new ICICI Bank set to born on March 31 following the reverse merger of ICICI with ICICI Bank. The merged entity will have a pan-Indian presence.
The Narasimham Committee (of 1991 as well as 1998) had recommended that there should be three to four large banks (including the State Bank of India) with international presence.
It also said there should be 8-10 national banks with a network of branches throughout the country engaged in general or universal banking while local banks should confined their operations to specific regions.
Besides, the rural banks (including RRBs) should operate in rural areas predominantly financing agriculture and allied activities.
The committee had also mooted a merger between two strong banks to have a
