Lok Sabha Question No. 871 (UNSTARRED), answered on 2018-12-14
Subject: Merger of Banks
Ministry: FINANCE
Asked by: R.K. BHARATHI MOHAN, P.K.SREEMATHI TEACHER, SAUGATA ROY, ASADUDDIN OWAISI, PR. SENTHILNATHAN, R. VANAROJA, PARASURAMAN K., V. SATHYABAMA

## GOVERNMENT  OF INDIA MINISTRY  OF FINANCE DEPARTMENT  OF FINANCIAL SERVICES

## LOK SABHA

## UNSTARRED QUESTION NO. 871 TO BE ANSWERED ON THE 14 TH  DECEMBER 2018/ AGRAHAYANA 23, 1940  (SAKA) Merger of Banks

871.   SHRI BHARATHI  MOHAN  R.K.: SHRIMATI P.K.  SREEMATHI TEACHER:

PROF. SAUGATA  ROY:

SHRI ASADUDDIN  OWAISI:

SHRI PR. SENTHIL NATHAN:

SHRIMATI VANAROJA  R.:

SHRI K. PARASURAMAN:

SHRIMATI V.  SATHYA  BAMA:

Will  the Minister  of FINANCE  be pleased to state:

- (a) whether  the Government  has any  proposal  to merge  Vijaya  Bank,  Dena Bank and Bank of Baroda and also proposes to merge more  banks,  if so, the details  thereof  and the reasons/objectives  therefor;
- (b) the  present   stage  of  such  proposal   and  the  detailed roadmap   chalked   out  by   the Government  in this regard  in the light  of experience  gained  after merger  of State Bank  of India subsidiaries  and Mahila  Bank;
- (c) the details  of total  turnover  amount  in each of the Public  Sector  Banks  and private banks in the last year;
- (d) whether  the Government  has taken  any  efforts to find a solution  with  regard  to the Non-Performing  Assets issues, employees  job assurance,  number  of bank  branches  and other  bank  related  issues, if so, the details  thereof  and the stand of the Government  in this regard;  and
- (e) whether  such mergings  will  help the banking  industry/customers and the country and if so, the details  thereof?

## ANSWER Minister of State in the Ministry  of Finance

## (SHRI SHIV PRATAP  SHUKLA)

(a)  to  (e):The   Banking   Companies   (Acquisition and  Transfer   of  Undertakings) Acts of 1970 and 1980 provide  that  the Central  Government,  in consultation  with  the Reserve Bank of  India  (RBI),  may   make   a  scheme, inter  alia ,  for  the  amalgamation   of  any nationalised   bank   with   any   other   nationalised   bank   or  any   other   banking   institution. Various   committees,   including   Narasimhan   Committee   (1998)  constituted   by   RBI, Leeladhar  Committee  (2008) chaired  by  RBI Deputy  Governor,  and Nayak  Committee (2014)  constituted   by   RBI,  have  recommended   consolidation   of  Public   Sector   Banks (PSBs) given underlying benefits/synergies. Taking  note of this and potential  benefits  of consolidation   for  banks   as  well   as  public   at  large   through   enhanced   access  to  banking services,  Government,  with  a view  to facilitate  consolidation  among  public  sector banks to create strong  and competitive  banks,  serving  as catalysts  for growth,  with  improved risk  profile  of the bank,  approved  an approval  framework  for proposals  to amalgamate PSBs through  an Alternative  Mechanism  (AM).  AM,  after consulting  RBI, in its meeting held  on  17.9.2018,   approved   that   Bank of  Baroda,   Vijaya   Bank and  Dena  Bank may consider  amalgamation  of the three  banks.  Banks have since considered  amalgamation, and  the  Board  of  Dena  Bank has  recommended   the  same,  while   Boards  of  Bank of Baroda and Vijaya  Bank have  given  in-principle  approval  therefor.

RBI  has  furnished   bank-wise   total   income   of  PSBs  and  private   sector  banks   in  the financial  year  FY 2017-18 in this  regard,  which  is given  in Annexure.

Over the last four and half years,  Government  has pursued  a comprehensive  approach for addressing  non-performing  assets (NPA)  issues. Key elements  are as under:

- (1) Recognising  NPAs  transparently :  Forbearance   has  been  ended  and  stressed  assets classified   as  NPAs   under the  Asset  Quality Review   (AQR)   in  2015  and  subsequent recognition   by   banks.   Further,   restructuring schemes  that   permitted   such  forbearance have  been  discontinued   in  February   2018.  As  a  result,   as  per  RBI  data,   Standard Restructured  Assets (SRAs)  of Scheduled  Commercial Banks (SCBs) have declined  from the peak of 6.5% in March 2015 to  0.49% in September  2018.
- (2) Resolving  and  recovering  value  from  stressed  accounts  through  clean  and  effective  laws  and processes :  A  fundamental   change   has  been  effected  in  the  creditor-debtor   relationship through   the  Insolvency   and  Bankruptcy Code,   2016  (IBC)  and  debarment   of  wilful defaulters  and connected  persons from the resolution  process. A sizeable  proportion  of the  gross  NPAs   of  the  banking   system are  at  various   stages  of  resolution   in  National Company   Law  Tribunal   (NCLT).   To make   other   recovery   mechanisms   as  well   more effective,   Securitisation   and  Reconstruction of  Financial   Assets  and  Enforcement   of Securities   Interest   (SARFAESI)Act   has  been  amended   to  provide   for  three   months' imprisonment   in  case  borrower   does  not  provide   asset  details,   and  for  lender   getting possession of mortgaged  property  within  30 days,  and six new  Debts Recovery  Tribunals (DRTs) have been established.  As a result,  NPAs  of PSBs reduced  by  Rs. 2,61,359 crore over the last four and a half financial  years.  Further,  PSBs reported  record  recovery  of Rs. 60,713 crore  in the first half of FY 2018-19 (H1 FY 2018-19), which  is more  than  double the recovery  made in the first half of FY 2017-18, and gross NPAs  have begun declining, with  a reduction  of Rs. 26,798 crore  in H1 FY 2018-19. 30-day plus overdue  accounts (Special   Mention   Accounts   (SMA)   1  and  2)  have  also  reduced   steadily   to  around 39% over  five  quarters   (from   Rs  2.25  lakh   crore   in  June 2017  to  Rs.  0.87  lakh   crore   in September  2018 for PSBs), indicating  significant  and sustained  reduction  in risk  of fresh NPAs.   Thus,   improvement   in  asset  quality   is  evident   with   GNPAs   having   peaked, recognition   nearly   over,   and  the  amount   in  SMA   1  and  2  reducing   by   61%  over  five quarters.   Further,   with   substantial   provisioning, the  provisional   coverage   ratio(PCR)of SCBs has risen  steadily   to  67.17%  as  of  September   2018,  from   the  pre-AQR   level   of 49.3% in March 2015,  cushioning  bank  balance-sheets  to absorb  the impact  of NPAs.

## (3) Reforming banks through the PSB Reforms Agenda :

Reforms  include -

-  number   of  lenders   in  consortium   restricted   by   requiring   minimum   of  10%,  for better  managed  consortium  lending,
-  ring-fencing  of cash flows  for prudent  lending,
-  monitoring  of loans above Rs. 250 crore  through  specialised  agencies for effective vigil,
-  use  of  technology   and  analytics   for  comprehensive   due-  diligence   across  data sources,
-  comprehensive  checking  of all accounts  of Rs. 50 crore  and above that  turn NPA for wilful  default  and fraud,
-  strict  enforcement  of conditions  of loan  sanction,
-  establishment   of  Stressed  Asset  Management   Verticals   in  banks   for  focussed recovery  and timely  and effective  management  of stressed accounts,
-  collection  of passport  details  of borrowers  for loans  above Rs. 50 crore,  and
-  enactment   of  the  Fugitive   Economic   Offenders   Act,   2018  in  order   to  deter economic  offenders from evading  the process of Indian  law  by  remaining  outside the jurisdiction of Indian  courts.

As regards  employee  issues, bank  branches  and other  bank-related  issues, the same fall within  the purview  of the bank  concerned,  subject  to RBI's guidelines/instructions and Board-approved  policies  of the bank  concerned.

## Lok Sabha USQ No. 871  for  14.12.2018 regarding  'Merger of Banks'

## Total income in each of the PSBs and private  sector banks in  FY 2017-18

| Bank                        | Total income during FY 2017-18   |
|-----------------------------|----------------------------------|
| AllahabadBank               | 19,051                           |
| Andhra Bank                 | 20,347                           |
| AxisBank Ltd.               | 56,764                           |
| BandhanBank Ltd.            | 5,508                            |
| Bank ofBaroda               | 50,430                           |
| Bank ofIndia                | 43,752                           |
| Bank ofMaharashtra          | 12,602                           |
| CanaraBank                  | 48,195                           |
| CatholicSyrianBank Ltd.     | 1,422                            |
| CentralBank ofIndia         | 26,658                           |
| CityUnionBank Ltd.          | 3,935                            |
| Corporation Bank            | 19,941                           |
| DCBBank Ltd.                | 2,724                            |
| DenaBank                    | 10,096                           |
| FederalBank Ltd.            | 10,912                           |
| HDFCBank Ltd.               | 95,619                           |
| ICICIBankLtd.               | 72,664                           |
| IDBI Bank Ltd.              | 30,040                           |
| IDFCBankLtd.                | 10,049                           |
| IndianBank                  | 19,522                           |
| IndianOverseasBank          | 21,848                           |
| IndusindBank Ltd.           | 22,031                           |
| Jammu&KashmirBank Ltd.      | 7,117                            |
| Karnataka Bank Ltd.         | 6,378                            |
| KarurVysyaBank Ltd.         | 6,600                            |
| KotakMahindraBank Ltd.      | 23,801                           |
| LakshmiVilas Bank Ltd.      | 3,389                            |
| NainitalBankLtd.            | 653                              |
| OrientalBankof Commerce     | 20,181                           |
| Punjaband SindBank          | 8,530                            |
| PunjabNationalBank          | 56,877                           |
| RBL Bank Ltd.               | 5,576                            |
| SouthIndianBank Ltd.        | 7,030                            |
| StateBank ofIndia           | 2,65,130                         |
| SyndicateBank               | 24,582                           |
| TamilnadMercantileBank Ltd. | 3,757                            |
| TheDhanalakshmiBank Ltd.    | 1,116                            |
| UCOBank                     | 15,141                           |
| UnionBank ofIndia           | 37,738                           |
| UnitedBank ofIndia          | 10,556                           |
| VijayaBank Yes Bank Ltd.    | 14,190 25,493                    |

Source: Reserve Bank of India