Union Cabinet approves amalgamation of Public Sector Banks through Alternative Mechanism

The Union Cabinet on 23 August 2017 approved amalgamation of Public Sector Banks through an Alternative Mechanism (AM) with an aim to facilitate consolidation among the Nationalised Banks to create strong and competitive banks.
 
Framework for Consolidation of Public Sector Banks
• The decision regarding creating strong and competitive banks will be completely based on commercial considerations.
• The proposal of Consolidation must start from the Boards of Banks.
• The proposals received from the banks for in-principle approval to formulate schemes of amalgamation should be placed before the Alternative Mechanism (AM).
• After in-principle approval, the banks will be required to take steps in agreement with law and SEBI’s requirements.
• The final scheme will be notified by Union Government in consultation with the Reserve Bank of India (RBI).

Consolidation of State bank of India (SBI)
• In 1991, it was suggested that India should have fewer but stronger Public Sector Banks.
• However, this was first implemented in May 2016 with the amalgamation of six banks into the State bank of India. The merger was completed in record time.
• SBI is now a single bank with about 24000 branches, over 59000 ATMs, 6 lakh POS machines and over 50000 business correspondents.
• Now, SBI also has a significant international presence and is one of the largest global banks.
• With SBI's lowest lending rates, loans to the small business man or woman and to the Krishak have become cheaper.
• More than 8.6 lakh merchants have been on board on BHIM Aadhaar, Bharat QR and POS, increasing the digital banking footprint.

There are now 20 Public Sector Banks other than SBI. The banking scenario has changed since 1970-80 when banks were nationalised with an increased banking presence from Private Sector Banks, non-banking Financial Companies, Regional Rural Banks, Payment Banks and Small Finance Banks.