/ August 19, 2019
The quest to create large-sized Indian Bank that will adorn in the league of global banks is an old one, and had been continuing since 1991, when Narsimham committee mooted the idea. The committee recommended merger of large Indian banks to make them strong enough for supporting international trade. The suggestion was reinforced by P J Nayak panel in 2014, which recommended either merger or privatization of Public Sector Banks (PSBs).
Merger of PSBs will bestow manifold advantages to Indian economy, which has targeted to become USD 5 trillion economy in the near future. Merger would lead to the following benefits to the highly fragmented banking sector:
The State Bank of India (SBI) merger (1.4.17) and the Bank of Baroda merger (1.4.19) are two important events to consider. The merger enabled SBI to become the 55th largest bank in the world with balance sheet size of INR 41 lac crore and Bank of Baroda to become the 3rd largest bank in the country with a business of INR 14.86 lac crore.
However, there is a flip side!
Despite these cons, merger of banks is a novel idea, which could make the industry stronger and deal effectively with burgeoning NPAs. Even after recent mergers, we are far off from the target of occupying coveted seat among top 10 banks in the world and corner large chunk of international business. Our neighboring country China, supporting the largest population in the world, enjoys the top 3 positions of largest banks in the world.