The government is planning to merge the Four state-run banks including Bank of Baroda, Central Bank, Oriental Bank of Commerce and IDBI bank to combat the losses against them. If the merger process is further proceeded, the merged entity will be the second-largest entity after State Bank of India with an asset of about Rs 16.58 trillion.
The main cause for the merger is to cut down the rise in bad loans in the government’s books which has crippled some of the banks to reduce the lending capability. If the four state run banks will merge, they will be able to sell the assets, reduce overheads or even shut down the money-losing branches.
The combined loses of all the four above banks collectively is estimated Rs 21,646.38 crore by the end of 31st march.
The finance ministry is also planning to sell the stake of 51% stake in the IDBI Bank for the worth of Rs 9,000-10,000 crore. One people aware of the matter said, “Dilution of government stake in IDBI Bank could also be achieved through stake sale to private equity investors”.
However, government declined to talk on this matter citing it as highly market sensitive.