Under the leadership of Finance Minister Nirmala Sitaraman, the Government of India (GoI) has consolidated 10 Public Sector Banks into 4 banks. This action came into effect on April 01st, 2020. At present, there are 12 banks in the public sector and the plan is to reduce the number to 4-5. It seems that the central government is planning another round of mergers of public sector banks. The government has recognized that the small banks are facing problems of loan evasion, unfavorable economic conditions, and difficulty in raising funds.
With this, it is believed that only the big banks can survive in the long run. As part of this, the Modi government first merged five subsidiary banks of SBI and Bharatiya Mahila Bank in 2017. In 2019, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with India’s largest lender SBI. With this, SBI became a giant bank. Then the second phase completed the merger between other banks in 2019 and 2020.
As a result, seven large banks and five small banks are currently operating in the public sector. Official sources said that the government's plan is to reduce the number of public sector banks to 4-5 with another round of mergers. It has been revealed that the central government has examined the in-depth study report on the results of the mergers so far. They said that the government has asked the public sector banks to give their opinion by the end of this month. The Indian Banks Association said it will consult stakeholders before formulating a future plan.
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