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Union Government constitutes Arun Jaitley led committee to oversee PSU bank mergers

The Union Government on 31 October 2017 constituted a ministerial committee headed by Finance Minister Arun Jaitley to oversee merger proposals of 21 state-owned PSU banks.

The other members of the committee include Railways and Coal Minister Piyush Goyal and Defence Minister Nirmala Sitharaman.

Besides this, the Union Government is working on banking reforms and constituted an Alternative Mechanism for Public Sector Banks. The mechanism will oversee the proposals coming from boards of PSBs for consolidation.

Earlier in October 2017, the Union Government announced a Rs 2.11 trillion Bank Recapitalisation Plan for public sector banks to stimulate the flow of credit to fuel private investment.

PSU Banks Consolidation
PSU bank consolidation has been in talks since 1991, when M Narasimham, former Reserve Bank of India (RBI) Governor, suggested the merger of banks into a three-tiered structure led by three large banks with an international presence.

Later in 2014, the PJ Nayak panel recommended that the government should either merge or privatize state-owned banks. Consolidation will help these banks in dealing better with their credit portfolio including stressed assets.

Earlier in 2017 itself, the banking sector witnessed the consolidation of State Bank of India (SBI), which merged operations of its five associate banks and Bharatiya Mahila Bank with itself, marking the first consolidation move following the bad loan crisis.

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