Remember Indradhanush? Now PNB And Bank of Baroda May Take Over Smaller BanksBank of Baroda (Gryffindor/Wiki Commons)

Continuing its task of encouraging consolidation among public sector banks, which earlier this month saw the country’s largest bank, the State Bank of India, merge its five associate banks and Bharatiya Mahila Bank in a bid to provide the lenders an opportunity to boost their efficiency and scale, the government may take the necessary steps to enable the Punjab National Bank (PNB) and Bank of Baroda to take over smaller lenders.

The government, in a bid to facilitate the overhaul of state-run lenders is looking at the next round of consolidation, public offers by banks to raise fresh capital in the next few months, and changes in the hiring policy that includes increased lateral entry. The Prime Minister’s office, reports The Economic Times, is looking forward to having few large banks rather than many small ones.

“We may start with some low-hanging fruit. For example, Punjab & Sind Bank can be merged into Punjab National Bank. Big lenders like Bank of Baroda can take over some turnaround banks in the southern region, like Indian Overseas Bank,” a senior finance ministry official has been quoted by The Economic Times as saying. The plans are all in the proposal stage and no decisions have been made as yet. Although, the news has boosted the shares of all the banks mentioned above.

With these steps, the government may finally be looking for tangible results like those which were set out for the Indradhanush programme. The Indradhanush framework was a reform structure for transforming the public sector banks announced by the finance minister in 2015.

Also Read: How Far Can IndraDhanush Go?

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