India plans to reduce number of state-owned banks: Sources – Gulf Today

India plans to reduce number of state-owned banks: Sources – Gulf Today

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Several government committees and the Reserve Bank of India have recommended that India should have not more than five state-owned banks.

"The government has already said that there will be no more mergers (between state-owned banks) so the only option for them is to divest stakes," a senior official at a state-owned bank said.

Last year, the government had merged ten state-owned banks into four, creating a handful of larger banks in the process.

"Now we are thinking of selling the unmerged banks to private players," the government official said.

But the government's privatisation plan is being worked out when the banks may face rising bad loans later this financial year because of the fallout from the coronavirus crisis.

The divestment plans may not happen in this financial year due to unfavourable market conditions, the sources said.

India expects bad loans at its banks could double after the crisis brought the economy to a standstill. Indian banks already had 9.35 trillion rupees ($124.38 billion) of soured loans, equivalent to about 9.1% of their total assets at the end of September 2019.

As a result, the government may need to pump in nearly $20 billion into its state-owned