The finance ministry is examining the feasibility of merging five public sector banks with larger banks. According to news reports, the five banks that are candidates for the so-called merger are Andhra Bank, Bank of Maharashtra, Dena Bank, Punjab & Sind Bank, Vijaya Bank and United Bank of India and the working group on consolidation and restructuring of PSBs has in fact mooted such mergers. Such a move will also help the Indian banking sector to comply with Basel III norms that would come into effect in 2018 besides creating large banking entitites capable of competing with foreign banks. Under Basel III norms, banks are required to raise around Rs 4.5 lakh crore in tier-1 capital, including a susbtantial amount as equity capital. In addition to these banks, the government is also mooting the idea of merging all the associate banks of the State Bank of India with the parent bank.
