The government on Wednesday decided to take consolidation in the banking sector to the next level by setting up a ministerial panel led by finance minister Arun Jaitley to consider and oversee mergers among the country’s 21 state-run banks. The decision, which comes a day after bank employees’ unions went on strike and at a time when state-owned banks are reeling under losses and stressed loans, has raised questions about the timing and purpose of such a large-scale consolidation.
Jaitley said that merger proposals have to come from bank boards and that decisions will be taken purely on commercial considerations. Such considerations include the desire of banks to reduce the concentration of their loan portfolio in certain geographies and to acquire a fresh footprint in certain other markets, said a government official on condition of anonymity.
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