Indian government has been planning consolidation of public sector banks for quite some time. The process is tedious and requires synchronization of many public sector banks in order to have the desired positive impact. Public sector banks have been under stress due to high non-performing assets.

PSU Bank Consolidation views by Rajiv Singh from Karvy Stock Broking...

Announcing another master stroke move to pave path towards 5 trillion dollar economy, Finance Minister has consolidated major PSU Banks. By consolidating 10 major banks into 4 and bringing the total count of PSB to 12 will help in credit up tick and will help revive the economy.

Diligence in selection of entities, regional inclusion, usage of technological platform, NPA’s and allocation of funds to these entities will make sure of availability of liquidity in the system. Moreover, it will help these merged entities to aspire to be competitive on account of their All India presence besides cutting down on duplication of overheads. Recruitment of chief risk officers and linking their performance will bridge the discount in valuations between private and public banks.

Encouragement of individual development plan will ensure smooth transition and succession plans for these merged entities which will also ensure proper functioning of these banks. She has commented that after Asset Quality review framework from RBI loan recoveries have improved over last one year which will help bring down NPAs.