Niti Aayog readies report on PSU banks consolidation

After the merger of SBI and its subsidiaries, the finance ministry is actively considering more consolidation in the banking space. Sources told ET Now that policy think tank Niti Aayog is working on the roadmap for further consolidation in PSU banks.

"NITI Aayog report on merger and consolidation in public sector banks is expected in a month," a senior Finance Ministry official said.

The government believes that there are low hanging fruits in the banking space like PNB, Bank of Baroda, Bank of India and Canara Bank, where big banks can absorb certain smaller lenders. Niti Aayog has been asked to study synergies for various PSU banks. Issues such as financial health, NPAs, geographical outreach, regional balance, HR transition will also be considered.

"Earlier the view was that NPA issue has to be addressed before further consolidation but now we believe RBI and banks will start cracking NPA defaulters post NPA ordinance and hence simultaneously consolidation work should also begin", a source added.

Finance Minister Arun Jaitley has also expressed at several occassion that India needs 5-6 banks of global size and scale and further consolidation in the banking sector would be done at appropriate time.