In order to create much stronger financial institutions, the finance ministry is examining various suggestions made by investment bankers to merge the country's biggest state-run banks. The Ministry is evaluating these proposals which includes consolidation based on geography, business mix and information technology systems.
Among all the proposals, one suggests Punjab National Bank, Indian Bank and Dena Bank be merged to create a bank with an asset base of more than Rs 9 lakh crore, while another possible combination is to merge Bank of India, Allahabad Bank, Corporation Bank, Bank of Maharashtra and Punjab & Sind Bank.
The basic rationale behind this move is to create large banks with a pan-India presence. However, this decision to form stronger financial institutions will hinge on political more than economic considerations. As a matter of fact, India's banks are still small when compared with global rivals. The country's largest, State Bank of India is ranked 16th in Asia while Bank of Baroda is at 32.
In a separate development, Finance Ministry has kick-started the search process for a 'special counsel' who will have the exclusive mandate to represent the government in tax disputes at the Supreme Court. Further, the Central Board of Direct Taxes has already held preliminary discussions with a few senior standing counsels in this regard and would be discussing the terms of reference with shortlisted candidates as early as next week.
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