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Govt not forcing public sector banks on consolidation: Mukherjee
December, 08th 2009

The Finance Minister, Mr Pranab Mukherjee, on Monday said that although mergers and acquisitions are needed in the interest of the economy, the Government was not forcing public sector banks (PSBs) to go in for consolidation.

He made it clear that the Government would endorse consolidation proposals of PSBs if the parameters were in conformity with the Securities and Exchange Board of India and Reserve Bank of India guidelines.

Supportive role

Responding to a calling attention motion moved by the Communist Party of India (CPI) leader, Mr Gurudas Dasgupta, in Lok Sabha, Mr Mukherjee said that the initiatives for consolidation has to come from the management of the banks themselves with the Government playing a supportive role as the common shareholder.

No, the Government is not taking any initiative for mergers (among PSBs). We do not force anybody to merger. No directive on consolidation is being issued by the Government and the RBI. Let us leave it to the entities themselves, Mr Mukherjee said.

Mr Mukherjee said that the Government has no intention of interfering in the normal and functional activities of PSBs.

Interests of stakeholders

While examining any merger proposal, the Government will keep in view the interests of the stakeholders, including the employees of the merging banks, Mr Mukherjee added.

Broadly, the employees, the owners/shareholders and the customers constitute stakeholders of the banks. Mr Mukherjee highlighted that suitable clauses are incorporated in the scheme of amalgamation/acquisition so that the pay and allowance or the compensation to the employees of merging entities are not altered to their disadvantage.

Earlier, Mr Dasgupta wanted the Finance Minister to come clean on whether the Government had overtly or covertly taken initiatives to bring about mergers within PSBs.

Economic rationale

He also sought to know the economic rationale behind State Bank of India (SBI) move to acquire State Bank of Indore when the latter was much better in all parameters when compared with its parent bank.

In each of the parameters such as business per employee, deposits per employee, advances per employee and priority sector coverage, the State Bank of Indore's performance was better than SBI's, Mr Dasgupta said.

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