Government not forcing banks to merge: Pranab

Mergers and amalgamations among state-owned banks were not taking place at the government's directive, finance minister Pranab Mukherjee told the Lok Sabha on Monday.

"The government has not taken any initiative, nor has it issued any directive to banks for merger," he said while replying to a calling attention motion by Communist Party (Marxist) leader Gurudas Dasgupta.

In his motion, Dasgupta had expressed concern that the government was trying to close down smaller banks by merging them with their larger ones.

Mukherjee said although mergers and acquisitions were needed in the interest of the economy, the government was not forcing public sector banks to go for consolidation. He said the proposals had mostly come from the bank management. "If two banks decide to merge, the government or the RBI (Reserve Bank of India) gives its approval," he said.

Dasgupta in his motion had referred to the recent merger between State Bank of India and one of its subsidiaries, State Bank of Indore. He said such mergers were not in the overall interest of the country, since 41 per cent of the people did not have access to formal banking. "There is complete disarray in the banking space," he said.

The CPI(M) leader claimed that in most of the parameters such as business per employee, deposits per employee, advances per employee and priority sector coverage, State Bank of Indore's performance had been better than SBI's.

In response, Mukherjee said mergers happened if two banks "think it is in the larger interest of the economy and clients". On the SBI absorbing the Madhya Pradesh-based bank, he recalled the historical context of the banks set up by princely states seeking merger with the major nationalised banks after Independence.

Mukherjee said the government has no intention of interfering in the normal activities and functioning of public sector banks. Seeking to allay Left fears of job losses due to amalgamation, he said, suitable clauses are incorporated in the scheme of amalgamation or acquisition so that the compensation packages of the employees of merging entities are not altered to their disadvantage.