Even as the government is awaiting RBI suggestions on possible merger of state-owned banks, the alternate mechanism to oversee amalgamation proposals may suggest a few steps in its next meeting. The government had earlier approved creation of an alternate mechanism—a

panel of ministers—to give in-principle approval to merger proposals.

Official sources said though no timeline has been fixed for mergers as they are driven by market and synergy considerations, the finance ministry hopes at least one set of merger will be possible in the current fiscal.

Encouraged by the process of IDBI Bank take-over by LIC, the Centre is keen on taking the PSB consolidation ahead. The government line of thinking is that mergers are possible if done with proper planning.

There are no proposals on the table as of now. State Bank of India has ruled itself out as it merged its five subsidiaries and Mahila Bank with itself. The next big banks in the order are Punjab National Bank, Bank of Baroda and Canara Bank. They should consider themselves as the lead banks for merging smaller banks like OBC, Punjab and Sind Bank, Central Bank, Allahbad Bank, Indian Overseas Banks and like.

But there has to be two small and one mid-sized bank for better synergy, branch optimisation, HR utilisation, deposits and lendings improvements, checking bad asset quality, improving net interest margins and reduced cost of deposits among others, said sources.

The government has asked the Reserve Bank of India (RBI) for its suggestions on specific public sector banks (PSBs) permutations and combinations that could be merged in a bid to achieve synergy.

“The government has requested the RBI for views as well as suggestions regarding specific possible combinations to achieve scale and synergy for appropriate consideration,” minister of state for finance Shiv Pratap Shukla said in a written reply in the Rajya Sabha.