Mega bank merger on the cards; Govt planning to merge four banks

Mega bank merger on the cards; Govt planning to merge four banks

New Delhi: After the successful merger of State Bank of India (SBI), another mega bank merger seems to be lined up. If the reports are to be believed, the government is planning to merge Bank of Baroda, IDBI Bank, Oriental Bank and Central Bank.

Notably, the combined loss reported by these four banks is of Rs. 21,646.38 crore in the year ended March 31st.

According to a report by PTI of March last year which quoted finance ministry officials, the government wants to create 4-5 global sized lenders.

It should be noted that on April 1, 2017, government merged five associate banks and Bharatiya Mahila Bank with SBI. This merger was done with the intention to propel the country’s largest bank into the top 50 banks of the world.

As the report said, if government’s plan works out well, this merger would create India’s second largest bank after SBI with a combined asset of Rs. 16.58 trillion.

The main aim of government behind creating large banks is to sort out the issue of bad loans. In last three years, banks have seen a large chunk of their loan books turning sour, while demand for fresh loans has remained low. This has resulted in the increase of bad loans percentage in the total loans.

According to reports, the bad loans has crossed the bar of Rs. 10 lakh crore, including Rs. 8.9 lakh crore share of government owned banks. These many loans corporate borrowers are not repaying to the banks.

In the intervening time, the big lenders like SBI, ICICI Bank and IDBI banks are reportedly in the process of selling outstanding loans amounting to be a little less than Rs 28,000 crore. The lenders are taking this step as they are discouraged with the slow resolution process under Insolvency and Bankruptcy Code.