Government is planning to merge two large Mumbai based banks

If reports are to be believed than the Government is planning to do a big merger of two large banks in the coming fiscal year after the bad assets clean-up is done. It is seen as a turnaround of the banking sector.

For this to happen the state banks must cleat their balance sheets as they currently have 88% of a pile of stressed loans that exceeds Rs 9 lakh crore in June.

Recently Vinod Rai was hired this year to lead new Banks Board Bureau as head, said that next step could be the merger of two large Mumbai based banks but till now he has not told the names.

This is just the starting and once the consolidation has taken place, in the second phase they will put a weaker, smaller banks into this merged entity.

He further told that deliberations were preliminary and depended on the success of efforts to restructure the balance sheets of India’s nearly two dozen public sector banks.

State Bank of India is also in a process of acquiring several affiliates, the two largest public sector banks based in Mumbai are Bank of Baroda and Bank of India.

The employees in these Government banks have also asked to work even in weekends and mist of them are not enjoying their weekly offs as the Government wants to this merger as soon as possible.

Mr. Rai also told that these banks are in loss because due to political pressure these were asked to invest in the projects that were not economically viable. He also proposes to create an advisory committee that could review proposals to take write downs and on irrecoverable loans was enshrined in a Reserve Bank of India circular in June.