Merger of weak PSU banks can be a possibility: UBI CEO

Kolkata: Merger of weak public sector banks cannot be ruled out in a run up to meet Basel III norms, a top bank official said today.

"I think they (government) will be looking to two quarters, December 16 (Q3) and March 17 (Q4) and then a decision may be taken on merger of banks specially which are not doing well," United Bank of India (UBI) Managing Director and CEO P K Bajaj said at a post-budget panel discussion organised by the Calcutta Chamber of Commerce.

However, he clarified that this has not yet been announced as of now and government was concentrating on merging associate banks of SBI with the parent.

Bajaj pointed out that Rs 10,000 crore each for FY2017-18 and FY2018-19 for recapitalisation of banks is not adequate given the stress in the banking system due to core sectors like steel, power, infrastructure and coal.

According to estimates, banking sector needs Rs 1.3 lakh crore to Rs 1.5 lakh crore to meet the Basel III norms.

Moreover, government was setting goals to get capital for recapitalisation and some banks may not be able to meet the criteria. UBI is one of the banks which have failed in meeting the goals and likely to lose out some capital.

Many banks which may not able to raise capital in equity, QIP will be an option but would depend on market conditions. However, a positive relaxation by RBI on AT 1 bonds interest payment norms will give some leeway for banks to raise tier I capital.