India's banking sector could see a merger of at least four state-run banks as the government seeks to address the sector's bad debt problems, which has crippled some of the banks' lending ability, India's Mint reported June 4, citing two people aware of the matter.
The government is considering merging Bank of Baroda, IDBI Bank Ltd., Oriental Bank of Commerce and Central Bank of India, among other banks. The move would allow weak banks to divest assets, reduce overheads and shut down unprofitable branches, according to the report.
The four banks recorded combined losses of 216.46 billion Indian rupees for the fiscal year ended March 31.
If the plan pushes through, the merged entity would become the second largest bank in the country following State Bank of India. The plan would also follow the merger of five associate banks and Bharatiya Mahila Bank with State Bank of India in April 2017.
In addition, the country's department of financial services is considering selling a 51% stake in IDBI Bank to a strategic partner for around 90 billion rupees to 100 billion rupees.
Emails seeking comments from the the four state-run lenders were not answered, while government officials declined to comment, stating that the matter is highly market sensitive, the report said.
As of June 1, US$1 was equivalent to 66.97 Indian rupees.
