Jaitley-led panel may direct banks to examine merger proposal

New Delhi: Finance Minister Arun Jaitley-headed ministerial panel on consolidation of PSU banks has been empowered to direct lenders to examine proposals for amalgamation.

The Finance Minister headed Alternative Mechanism (AM) will receive inputs from the Reserve Bank of India (RBI) before according in-principle approvals, the government said in a statement on Wednesday.

“The proposals received from banks for in-principle approval to formulate schemes of amalgamation will be placed before the AM. A Report on the proposals cleared by AM will be sent to the Cabinet every three months,” it said.

“Alternative Mechanism may also direct banks to examine proposals for amalgamation,” it added.

It said the AM, which will receive inputs from the Reserve Bank before according in-principle approvals, may also direct banks to examine proposals for amalgamation.

The other members of the AM panel are Minister of Railways and Coal Piyush Goyal and Minister of Defence Nirmala Sitharaman.

The AM would devise its own procedure for appraisal of amalgamation proposals by banks, and be guided overall by the objectives of the Nationalisation Acts [Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980].

The statement further said that the “Final Schemes” formulated will be approved by the central government, and laid in both the Houses of Parliament.

While announcing the unprecedented Rs 2.11 lakh crore capital infusion road map for the public sector banks last month, Jaitley had said, this will be accompanied by a series of banking reforms over the next few months. The constitution of AM is a movement in that direction.

The Union Cabinet in August had decided to set up an Alternative Mechanism to fast track consolidation among public sector banks to create strong lenders.

The move to create large banks aims at meeting the credit needs of the growing Indian economy and building capacity in the PSB space to raise resources without dependence on the state exchequer.