Merger of Public Sector Banks and recommendations of the PJ Nayak Committee: Rajya Sabha Q&A
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
RAJYA SABHA
QUESTION NO 220
ANSWERED ON 26.04.2016
Merger of Public Sector Banks
220 Dr. Pradeep Kumar Balmuchu
Will the Minister of FINANCE be pleased to satate :-
(a) whether it is a fact that the Government is contemplating merger of Public Sector Banks (PSBs) into 5 or 6 from 27 existing and if so, the details thereof;
(b) what are the recommendations of the PJ Nayak Committee on this issue; and
(c) the stand of the Government in this regard?
ANSWER
The Minister of State in the Ministry of Finance
(a) to (c): The guiding principle for the consolidation process of banking in India has so far been the Narasimham Committee, according to which the move towards the restructured organisation of the banking system should be market-driven based on profitability considerations and brought about through a process of mergers & amalgamations (M&As). As far as merger of banks are concerned, any initiative with respect to merger of public sector banks has to come from the Boards of the banks concerned, the extant legal framework, keeping in view the synergies and benefits of merger and their commercial judgment.
The P.J. Nayak Committee recommended that the Government has two options: either to privatise banks showing poor performance and allow their future solvency to be subject to market competition, including through mergers; or to design a radically new governance structure for these banks which would better ensure their ability to compete successfully, in order that repeated claims for capital support from the Government, unconnected with market returns, are avoided.
Government’s / Reserve Bank of India’s role in the merger of banks would be that of a facilitator.
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