The Indian Government has established a panel that will be supervising the merger and consolidation exercises of public sector banks. The panel has been named the Alternative Mechanism Panel and will be spearheaded by Arun Jaitley, the Union Finance Minister and will have the Minister of Defence, Nirmala Sitharaman and Minister of Railways, Piyush Goyal, as its members. The panel has been formed after the Indian Government has already confirmed its intentions to infuse a whopping Rs.2.11 lakh crore into public sector banks.
The proposals that are cleared by this panel will be submitted in front of the Cabinet on a quarterly basis. The panel may also issue directions to public sector banks to consider amalgamation processes. It will also garner inputs from the RBI (Reserve Bank of India) prior to giving in-principle approvals to the same. The panel will also come up with its own process for appraising the amalgamation proposals by public sector banks and will be guided by the Nationalisation Acts (Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980) as it goes about its business.
The final schemes which have been formulated will have to obtain approval from the Central Government and will have to be passed by both Houses in Parliament. The panel will also be assisted by the Department of Financial Services in this regard. The plan for infusing Rs.2.11 lakh crore as capital into public sector banks will happen over the next two years as per the reports. Rs.1.35 lakh crore will also be raised via the recap bonds route and Rs.76,000 crore will be mopped up through equity issuance and budgetary support according to the Government.
Union Finance Minister Arun Jaitley has also stated that recapitalizing state banks will lay the foundation for several major reforms. 2/3rds of the country’s banking assets are accounted for by 21 public sector banks. However, a whopping Rs.9.5 lakh crore in stressed loans is also accounted for by them.