Bank consolidation to take a while

NEWDELHI: The NDA government may not be able to carry out the consolidation of public sector banks in its first term, which will end in 2019, as the road map for the process is expected to be ready only by next year, according to banking sector sources.

Moreover, bad loans continue to haunt these lenders, who are also finding it difficult to find new promoters and buyers for stressed or non-performing assets.

“It may be difficult for the government, RBI and the BBB under the current frame to force any merger on these banks,” Ashvin Parekh, managing partner, APA Services, said.

The Bank Board Bureau can chalk out the merger plan only when the balance sheets are “somewhat cleaned up”. The “compatibility” exercise between banks will be based on their financial status.

“What is expected is a concrete roadmap and how it would be carried out, but it will be difficult to carry out the actual process… for that you need time,” a senior government official said, adding that the number of state-owned lenders will be brought down in a phased manner.

At present, there are 27 government-owned banks in India, of which 12 have reported gross NPA ratios of over 10% as on June 30, 2016. Punjab National Bank has an NPA ratio of 15.41% while Bank of Baroda has 13.23% and UCO Bank 18.66%.

The gross NPA of all the stateowned banks combined increased to ₹5.59 lakh crore — 11.24% of advances — as on June 30, 2016, a massive 12% increase over the previous quarter.