India cancels plan for bank mergers and acquisitions

Central bank's aversion for consolidation of lenders spurs government to shelve moves to discuss M&As.

Initially, India's finance ministry had not involved Reserve Bank of India (RBI) in the process when the plan was initially discussed because it said the talks were informal. It was planning to consult the central bank only after some merger plans were firmed up.

But, according to a report in Business Standard, RBI has clearly stated its aversion to M&As, saying financial inclusion and not bank consolidation should be the priority.

In November, RBI Deputy Governor K C Chakrabarty had said consolidation in the sector can wait and the need of the hour was to extend banking services to more citizens.

The finance ministry, in December, had asked five state-run banks — Punjab National Bank, Canara Bank, Union Bank of India, Bank of Baroda and Bank of India — to explore merger opportunities in the banking industry.