Money & Banking

No uncertainty over PSB amalgamation: FM

Our Bureau New Delhi | Updated on February 26, 2020 Published on February 26, 2020

Govt moving ahead as per schedule, says Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman, on Wednesday, made it clear that there is no uncertainty over the amalgamation of 10 public sector banks (PSBs) into four, thus indicating that the government intends to stick to the April 1 deadline for the process.

Meanwhile, the Cabinet is likely to consider a formal proposal next week for the amalgamation process. “We are going as per schedule and the process is on course,” Sitharaman told reporters here after meeting the heads of public sector banks. She also said that there is no need for any speculation.

Amalgamation is a process where one or more entities are subsumed into another entity, giving birth to a new institution. Unlike merger, no share purchase is undertaken by the dominant institution, and it does not make any payment either. However, there is a ‘share-swap’ process, where the shareholders of various entities being subsumed are allotted a certain number of shares in the new entity.

“The government has the flexibility to compress the timeline to finalise the scheme of amalgamation,” said a senior government official.

This response comes at a time when doubts have been raised on the time needed to complete the process. After gaining approval from the Cabinet and bank boards, the matter will go the market regulator SEBI, as the entities to be amalgamated are listed on the stock exchanges.

Normally, it takes 30 to 40 days for the approval to be granted. With just one month left now, there were concerns.

The Banking Companies (Acquisition and Transfer of Undertakings) Acts of 1970 and 1980 provide that the Central government, in consultation with the Reserve Bank of India (RBI), may make a scheme, inter alia, for the amalgamation of any nationalised bank with any other nationalised bank.

Various committees, including the Narasimhan Committee (1998), constituted by the RBI; Leeladhar Committee (2008), chaired by the RBI Deputy Governor; and Nayak Committee (2014), constituted by the RBI, have recommended the consolidation of PSBs.

Published on February 26, 2020
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