Government proposal to merge two large banks first…..

The Bank Board Bureau chairman Mr. Vinod Rai has informed that Government is very intensely thinking of consolidation of banks.  This he said is proposed to be done after framing a strong balance sheet, which in turn is possible only if the Bad Debts issues are resolved.

The Non-Performing Loans was the main issue in a Balance Sheet which required correction.  This in turn does not pave way for merger of PSU banks, since there are not many large banks that can be tipped to go for a merger.  The biggest challenge seen in these mergers is the reduction of redundancies in terms of branches and employees.

Various options the Government looks ahead are – VRS (Voluntary Retirement Schemes), Going slow on fresh recruitment etc.  It is learnt that an Industry-wide restructuring package is being looked in to instead of company wise, since stree is concentrated in a few sectors like infra and steel.

There are rumours that two major banks viz, Bank of India and Union Bank of India, both Mumbai based may be merged, however there was no confirmation on this.



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