The Hindu Business Line : Union Bank-BoI merger likely to be one-off case this fiscal

"We would watch the mood of Parliament before going ahead with any merger. In any case, we do not see more than one merger going through this financial year."

New Delhi , Dec. 3

THE Finance Minister, Mr P. Chidambaram, might not have to attend too many banking sector marriages this season.

After a reality check, the Ministry of Finance is gradually reconciling itself to the thought that the proposed merger between Union Bank of India (UBI) and Bank of India (BoI) could be the only alliance that could go through in the public sector domain during the current fiscal.

Till recently, the Ministry had internally set itself a target of catalysing at least two mergers of strong public sector banks by end-March, 2005. However, with not so favourable noises emanating from political and trade union quarters, the Government appears to be in a cautious mood not to spark off a fresh controversy.

In fact, it is keeping its fingers crossed even for the UBI-BoI merger, the plans for which are now an open secret. "We would watch the mood of Parliament before going ahead with any merger. In any case, we do not see more than one merger going through this financial year, that too if things go off smoothly," a senior official said.

The official said that the Government would be able to comment on the specific merger plans only after the proposals are approved by the respective Board of Directors of the banks involved.

It is understood that the Reserve Bank of India is presently examining the UBI-BoI merger plans.

Only after receiving the tacit approval of the RBI would the two banks place their proposal for clearance by their respective Board of Directors.

During the past couple of months there have been speculations about several other possible merger combinations among public sector banks.

However, bank unions and political parties, including coalition partners in the United Progressive Alliance Government, have come out openly against some of the proposed alliances that have been speculated.

The Government, on its part, has consistently maintained that it would have no role in the actual merger process, except that it would play a supportive role.

The Finance Ministry has maintained that decisions on details of the mergers would be left to the banks' Boards.

However, the Finance Minister has made it clear that the Government favours consolidation among the public sector banks to create stronger banks that would be able to meet the challenges thrown up by tighter regulatory framework and the competition that are likely to come about in future.

More Stories on : Public Sector Banks | Mergers & Acquisitions | Politics

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