After SBI, more public sector banks' merger on cards

In a bid to overhaul the state-run lenders amid rising non-performing assets or NPAs, the government is likely to go for the next round of consolidation by allowing Punjab National Bank (PNB) and Bank of Baroda to take over smaller lenders.

The proposed bank consolidation is aimed at increasing operational efficiencies and managing the affairs of the lenders.

The Economic Times reported that the government was actively looking for consolidation with the Prime Minister's Office keen on having a few large banks rather than several smaller ones.

"We may start with some low-hanging fruit. For example, Punjab & Sind Bank can be merged into Punjab National Bank. Big lenders like Bank of Baroda can take over some turnaround banks in the southern region, like Indian Overseas Bank," The ET quoted a senior Finance Ministry official as saying.

However, the report suggests that no decision has been made as yet.

This is not the first time the government is considering the merger option. Earlier, the cabinet approved the merger of State Bank of India with its five subsidiaries.

While approving the proposal, Finance Minister Arun Jaitley said: "This merger will lead to far greater operational efficiency and synergy of operations. When the cost of operations comes down, the cost of funds will come down."