PNB and Bank of Baroda gearing up for next round of consolidation in Indian banking industry

Indian banking industry is working towards the next round of consolidation and public offers in the next few months so that banks can raise fresh capital. There would also be changes in the hiring policy, which would include increased lateral entry.

This would mean that Punjab National Bank (PNB) and Bank of Baroda, two of India’s state-run lenders might be taking over smaller lenders.

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As per a senior finance ministry official, Prime Minister's Office wants to have a limited number of large banks rather than several smaller ones.

"We may start with some low-hanging fruit. For example, Punjab & Sindh Bank can be merged into Punjab National Bank. Big lenders like Bank of Baroda can take over some turnaround banks in the southern region, like Indian Overseas Bank," the official told ET.

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"All these plans are fluid, as we also need to take clearances from the Competition Commission, as followed in the case of Bharatiya Mahila Bank and SBI merger," he added.

It was only last month that India’s biggest bank State Bank of India (SBI) absorbed five of its associate lenders and Bharatiya Mahila Bank.

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