The Central Government would support public sector banks to merge if they wanted, provided they fulfilled the guidelines of the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI), Finance Minister Pranab Mukherjee said on Monday.

“If someone decides to merge, if we see it is in conformity with our policy and if we find that parameters are being followed as per SEBI and RBI guidelines,” then the government would play a “supportive role,” he said in reply to a calling attention motion in the Lok Sabha.

Maintaining that the government had itself not taken any initiative to ask public sector banks to go for merger, he said it did not intend to interfere in their routine financial activities.

“The current policy of the government on consolidation leaves the initiative to come from the management of the banks themselves, with the government playing a supportive role as the common shareholder.” He said that no directive on consolidation was being issued by the government or the RBI.

The boards of the banks had to take a decision in this regard “based on the synergy levels of merging or consolidating entities,” he said.

The calling attention motion was moved by CPI leader Gurudas Dasgupta who asked whether the government had taken any initiative “overtly or covertly” to merge various public sector banks resulting in “discontent” among the bank employees.

Mr. Dasgupta referred to the move for merger of State Bank of India and State Bank of Indore and asked why the latter was being merged despite it doing well in terms of per employee performance. Mr. Mukherjee assured him that the interests of the stakeholders, including the employees of the merging banks and customers, would be fully protected.

Asserting that there was no government interference in the normal day-to-day financial and commercial activities of state-owned banks, he said, “We are giving them managerial autonomy. We cannot give them a directive not to merge.” Noting that such mergers had taken place even when the Left was participating in the United Front government in 1996-98, the Minister said while 46 banks were merged till 1969 when banks were nationalised, 33 banks were merged after that year.

Mr. Mukherjee said consolidation was a “continuous process” as mergers had occurred during “every regime.” Maintaining that the banking system had undergone major changes since nationalisation, he said the State Banks of Travancore-Cochin, Bikaner and Saurashtra were doing a “good job” and were being encouraged to do better. Mr. Dasgupta said mergers would not only lead to monopoly and lower competition in the banking sector, it would also lead to reducing access to banking for the vast majority of people.

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