Government to ask UCO Bank and two other public sector banks to merge with bigger peers

Government to ask UCO Bank and two other public sector banks to merge with bigger peers

After nudging State Bank of India, the country's largest lender, to consider a merger with its five associate banks, the government may now look at combining three other state-run lenders — UCO Bank , Bank of India and Indian Overseas Bank — with stronger entities. "There have been some discussions on the merger of these three weak banks with more financially sound lenders.

Various options have been discussed," said a finmin official, who did not wish to be identified. The official clarified that the discussions are in an exploratory stage, reiterating the stand that any consolidation proposal has to come from the banks and that the government will act only as a facilitator. Earlier this month, ET had reported that the government would prod SBI to kick-start the merger process with associate banks. SBI announced on Tuesday its intent to amalgamate them and Bharatiya Mahila Bank.

The merger decision is exploratory at this stage and there is no certainty about the completion of the acquisitions, SBI said in a filing to the stock exchanges. With the merger, SBI will get Rs 5,000 crore of fixed capital from the associate banks and BMB, Chairman Arundhati Bhattacharya told ET. According to reports, SBI will have deposits of over Rs 21 lakh crore and advances of Rs 17.5 lakh crore if the mergers are completed.

"All this will also improve our ranking among global banks. Our ranking will go up to 55 from 59 in terms of balance sheet size," Bhattacharya said.

For the merger of UCO Bank, Bank of India and Indian Overseas bank, the government may take the help of the recently constituted Banks Board Bureau (BBB) to overcome concerns over technology platform and human resource issues. "If required, the BBB can interact with the boards of these banks to work out a plan which takes care of all areas of concern," the ministry official said. UCO Bank, based in Kolkata, reported a net loss of Rs 1,715.16 crore in the three months ended March, its second straight lossmaking quarter.

The level of its gross NPAs widened to 15.43% from 6.76% a year earlier. Bank of India reported a loss of Rs 1,506 crore in the quarter ended December, while IOB posted a loss of Rs 1,425 crore in the period, the latest quarter for which they have declared results.

Source:BankingUpdates