Public Sector Banks Allowed to Amalgamate Through Alternative Mechanism (AM) (Download PDF)

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Public Sector Banks can now amalgamate through an Alternative Mechanism (AM) facilitating consolidation of Nationalized Banks into strong and competitive banks. Decision for creating strong and competitive banks.

Image of Amalgamate Through Alternative Mechanism

Image of Amalgamate Through Alternative Mechanism

Image of Amalgamate Through Alternative Mechanism

Process of Amalgamation

  • Decision for creating strong and competitive banks based solely on commercial considerations.

  • Proposal must start from the Boards of Banks.

  • Proposals from Banks for scheme of amalgamation is to be placed before the Alternative Mechanism (AM).

  • After in-principle approval, the Banks to further the process as dictated by law and SEBI’s requirements.

Background

There have been significant change in banking services since 1970s and 80s when banks were nationalized:

  • Increased banking presence from Private Sector Banks, non-banking financial companies, regional rural banks, payment banks, and small finance banks.

  • Large number of small banks with nearby branches makes them uncompetitive.

  • With more and more banking supported by electronic means-computers or mobiles requirement for close by branches with many employees is reducing.

  • Strong and competitive public sector banks can meet credit needs of a growing economy, absorb shocks, and have the capacity to raise resources without depending unduly on the state exchequer.

Consolidation of SBI

  • It is widely believed that India needs fewer but stronger Public Sector Banks.

  • In May 2016, consolidation of public sector banks began by amalgamation of six banks into the State bank of India.

  • SBI now a single bank with 24000 branches, 59000 ATMs, 6 lakh POS machines and over 50, 000 business correspondents. 70 % of SBI’s network lies in rural and semi urban areas

  • The 20 PSBs in addition to SBI are now the focus of government.

- Published/Last Modified on: September 13, 2017

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