Bad Loans in the Public Sector Banks have been a pressing issue for the growth of the economy and in an attempt to address the problem; the Government may look into merging the twenty seven PSBs into just six.
- Such a move was discussed in the recently held retreat of the chiefs of the PSBs, Gyan Sangam.
- An expert committee, which will be soon set up to look into the issue, will closely work with the Banks Board Bureau (BBB) to identify the right matches for consolidation.
- The BBB will independently oversee consolidation
- It will chalk out business plans for public sector banks, is set to be put in place by April 1, 2016
- As banks are short-staffed, a downsizing would not be required
- The newly formed, Bharatiya Mahila Bank may be merged soon.
- The Government will intervene only if banks show unwillingness for the mergers.
Some of the issues in the consolidation process would technology, asset base, regional strength and cultural match.
- A loan where repayments are not being made as originally agreed between the borrower and the lender, and which may never be repaid.
- The PSBs have lost a staggering Rs. 2.5 Lakh crore of public money as bad loans
- The extent of these “bad loans” is greater than the loss to the exchequer from the 2G scam (Rs 1.76 lakh crore) or Coalgate (Rs 1.86 lakh crore)
Apart from consolidation, the Govt has proposed to infuse Rs.25,000 crores in the PSBs to revive them.