New Delhi: In order to bring down the number of PSBs, the smaller state-run banks have been asked by the government to consolidate operations in the same geography. Apart from this, it has also been asked from the smaller PSBs to close overlapping branches and avoid competing with larger banks and focus on niche areas.
The government has taken this decision after the merger of Bank of Baroda, Vijaya Bank and Dena Bank. The merger will become the third largest lender of the country.
A senior finance ministry official said, “We would like to see PSBs doing differentiated banking. The smaller banks should not enter into the competition of large corporate loans or rather those sectors where they are not strong enough and they won’t be able to provide fund for long term.”
Clearances for the proposed merger are already been considered by the boards of the three banks. Out of the three, Bank of Baroda is the largest with a total business of Rs 10.29 lakh crore as on July 2018.
The official also said that the government is looking forward for the plans from national and regional banks regarding the plans for reorganizing their organizational resources which include human resources as well as information technology systems.
As of now, the country has 21 public sector banks including State Bank of India which is the largest bank of the country. The government is looking to bring down this number to around 10-11.
It has also been told to the 11 PSBs which are under the prompt corrective action (PCA) framework of the Reserve Bank of India to submit their turn-around plans. Under this, the rationalization of the branches is also included.
On September 25, Arun Jaitley, Finance Minister will be holding a quarterly review meeting to foresee the performance and it is also expected that banks under PCA will be sharing their plans.