No government pressure on banks to merge, says official

The government has no plan to force individual banks to merge and consolidate operations, financial services secretary R Gopalan said today.

He said the government has also set no time frame for public sector banks to start the consolidation process in the banking system. He was speaking at the Bancon conference in Mumbai.

Gopalan said any merger of state-run banks would be based on mutual interest and operational synergies of the concerned banks and the government cannot compel the banks to consolidate operations.

He, however, said the government would play a supportive role for banks to merge and consolidate operations and achieve economies of scale.
 
"We will not force consolidation upon the banks but will support the merger moves if banks come with proposals," Gopalan said, adding, "Amalgamation should be on mutual interest."

Banks have the freedom to decide on their acquisition plans and the government would only look at merger or acquisition proposals emerging from individual players, Gopalan said.

The Reserve Bank of India, he said, has been supporting the idea of bank consolidation as it was necessary for Indian banks to grow their size in order to face competition from global giants.