DFS secretary Rajiv Kumar said there is no need to amend the Bank Nationalization Act.
"The Alternative Mechanism took the view that aspirations of the fastest-growing economy have to be supported by stronger and globally competitive banks with increased choices to the stakeholders". FM Arun Jaitley also assured that the employees of all these three banks will be protected. Besides Jaitley, the alternative mechanism includes defence minister Nirmala Sitharaman and railway minister Piyush Goyal. Jaitley said that no employee on the combined entity will face any service conditions which are adverse in nature.
"It is a major economic, commercial decision", finance minister Arun Jaitley added.More news: Galaxy Note 9 Catches Fire In Woman’s Purse, Samsung Faces Lawsuit
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Rejecting Congress claim that the gross NPAs stood at Rs 2.5 lakh crore when the UPA exited power, he said that actual figure was Rs 8.5 lakh crore because of the indiscriminate and disproportionate lending during 2008 to 2014. "Accordingly, it was chose to consolidate the three banks", said Rajiv Kumar, Secretary, Department of Financial Services. "The government is keen to take steps so that history isn't repeated as far as NPAs are concerned", he added.
At present, state-run State Bank of India (SBI), private sector banks HDFC Bank and ICICI Bank are the three largest banks in the country.
Recalling the disastrous consequences of the first amalgamation in the public sector banking space, the leaders said when New Bank of India - which was a weak public sector bank - was merged with Punjab National Bank in the mid-80s, the latter took a long time to return to black. The gross Non -Performing Assets ratio will be around 13 percent with gross non- performing assets to be approximately around Rs 80,000 crores. After 2015, once the real picture was known through asset review by the RBI, both the govt and the RBI started taking corrective steps. The merged entity will have a combined business of Rs 14.82 lakh crore, with 10,000 branches and around 85,000 employees. "The best of the service conditions will apply to all of them". Vijaya Bank and Dena Bank, which are expected to gain from the merger, rose 1.25 per cent and 19.75 per cent respectively.