Caution needed
In the mercurial world of finance, the spectre of a bubble looms ominously over investors, casting shadows of doubt and trepidation.
A top representative of the All India Bank Employees ‘ Association (AIBEA) said that the government’s true goal in combining banks is to assist the big business as bank restructuring will not result in the recovery of enormous bad loans.
Opposing the merger of 10 public sector banks into four, C. H. Venkatachalam, General Secretary of AIBEA, in a statement issued here said in the name of banking reforms the government is enabling banks to help corporates.
Venkatachalam said that last fiscal the public sector banks posted a gross profit of Rs 150,000 crore. Owing to the provisions towards bad loans, there was a net loss of about Rs 66,000 crore.
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According to him, the merger of banks will not result in the recovery of bad loans. On the contrary, the merger of five associate banks of the State Bank of India has resulted in increased bad loans.
Pointing out at the Punjab National Bank, that failed to detect the Nirav Modi fraud, Venkatachalam wondered how banks, when they become bigger, could monitor effectively.
The government on Friday announced a mega plan to merge 10 state-run public sector banks into four large entities to address economic concerns.
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