PNB likely to take control of Allahabad Bank, two other PSBs; process may start in next 3 months

New Delhi: India’s Punjab National Bank could take control of two or three small public sector banks (PSBs), that could include Oriental Bank Of Commerce, Andhra Bank and Allahabad Bank, two sources familiar with the situation told Reuters.

The government has been trying to merge smaller regional state-run banks with better-managed larger government-owned lenders as one way to reduce bad loans that stand at more than Rs 9 lakh crore ($130 billion), or nearly 5 percent of the nation’s gross domestic output.

 PNB likely to take control of Allahabad Bank, two other PSBs; process may start in next 3 months

Representational image. Reuters.

Last year, the government engineered state-owned Life Insurance Corp’s takeover of IDBI Bank, a step to ensure that the bank with one of the highest levels of bad loans on its books is well capitalised.

PNB could start the process of taking control of the banks in the next three months, according to the sources, who declined to be named, as they are not authorised to speak to the media.

PNB shares fell as much as 4 percent after Reuters reported the news. Its shares ended down 2.55 percent at Rs 86.10 on National Stock Exchange (NSE) on Tuesday.

Allahabad Bank fell 2.6 percent to close at Rs 45.15 a share, while Oriental Bank of Commerce ended down nearly 1 percent at Rs 95.20 per share.

The government is seeking to consolidate the nation’s debt-burdened state banking sector.

PNB declined to comment, while the other banks did not immediately reply to an email from Reuters seeking further information.

The finance ministry also declined to comment on the story.

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Updated Date: May 21, 2019 18:21:50 IST