Government To Set Up Panel To Look At Consolidation For PSU Banks

New Delhi: The government will form a panel to devise a strategy for consolidation in the state-run banking sector, Finance Minister Arun Jaitley said on Saturday.

More than two dozen state-run banks dominate India’s banking sector with over two-thirds of assets. They also hold close to 85 per cent of the bad loans in the sector. Profits of the PSU banks have taken a beating on the rising number of bad loans.

Speaking on the rising concern of bad loans Mr Jaitley said that government will not write off bad loans. “No defaulter will be spared”, he warned. Minister of State for Finance Jayant Sinha added “We are monitoring the situation”. He reiterated that resources will be made available if banks require more funds.

Banks have favoured the idea of consolidation, Mr Jaitley told reporters after a two-day annual brainstorming event of senior officials from banks, the Reserve Bank of India and the Finance Ministry. He said there is a “need for strong banks and not more banks”

He also said the government was considering an employee stock option plan for the state-run banks.