FM rules out any direction to PSBs regarding mergers
By Joseph Samson
Dec 9, 2009
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Finance Minister Pranab Mukherjee has denied that mergers at different levels were happening because of government's directions.

He said, "The government has not taken any initiative, nor has it issued any directive to a bank for merger."

He clarified that proposals for consolidation between banks had mostly come from the banks' managements. He said that if two banks decide to merge, the government or RBI has to approve it.

Gurudas Dasgupta, from the opposition, pointed out a recent merger between State bank of India and its associate State Bank of Indore and said that such mergers were not in overall interest of the country since 41 percent people did not have access to formal banking.

"There is complete disarray in the banking space," he added.

Mukherjee said that mergers happened if the banks thought that it would be in greater interest of the economy and clients he said that the government did not intervene in such business decisions.

He termed mergers as normal activity and said that such decisions were prompted by pure business sense.

The bank regulator RBI is not in favour of consolidation. Emphasizing the need of making banking accessible to greater number of Indians, the bank's Deputy Governor KC Chakrabarty said that this was not the appropriate time for mergers and acquisitions in the system. He said, "Financial inclusion is more important than bank consolidation."

Public sector banks' employees are also unhappy with the consolidation in the industry. Around 4 lakh officers and employees have decided to go on a strike on 16th December to protest against the proposed merger of State bank of Indore with its parent company, State bank of India and other possible mergers in the industry.


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