What does SBI merger tells us about the upcoming bank mergers?
The Union Cabinet has approved an alternate mechanism for the merger of other PSBs in the coming days. Even though the move is expected to help but yet not entirely the solution needed for PSBs.
Key Highlights:
- Five state-owned banks account nearly half of total NPAs as on June 30, 2017
- SBI accounts highest 22.75% in total NPAs of all banks post merger
- SBI merger with six associate banks have been in effect from April 01, 2017
An “alternative mechanism” has been approved by the Union Cabinet chaired by Prime Minister Narendra Modi for mergers of Public Sector Banks (PSBs).
This mechanism would facilitate consolidation among the nationalised banks to create 'strong and competitive banks'.
Consolidation of PSBs comes at the backdrop of rising non-performing assets or bad loans. Bad loans in PSBs has resulted in higher provisions, deterioration in asset quality, higher slippages and thus lower earnings for banks -- not to forget their future lending is at stake.
As on June 2017, banks listed on stock exchanges saw sharp rise of 34.17% in NPAs to Rs 8,29,335 crore compared to Rs 6,18,109 crore in the corresponding period of the previous year.
Five public sector banks account for nearly half of non-performing assets
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