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India needs fewer, mega banks to achieve economies of scale: Finance Minister
Feb-19-2019

In order to achieve economies of scale in the banking sector, Finance Minister Arun Jaitley has said India needs fewer and mega banks. The finance Minister stated ‘India needs fewer and mega banks which are strong because in every sense, from borrowing rates to optimum utilisation, the economies of scale as far as banking sector is concerned are of great help’.

After the amalgamation of five associates and Bharatiya Mahila Bank with SBI in 2017, the government earlier this year approved the merger of Dena Bank and Vijaya Bank with Bank of Baroda. The merger of the three banks to create the country's third-largest lender after SBI and ICICI Bank. Jaitley said ‘with the experience in the past really has been of SBI merger, now it is second one which is taking place’.

The amalgamation, the first-ever three-way consolidation of banks in India, will be effective from April 1, 2019. After the merger, the number of public sector banks will come down to 18. Besides, in September 2018, the Alternative Mechanism, headed by Jaitley, gave in-principle approval for the merger of the three banks to create a global-sized lender.

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