This exercise will create six global size banks and will bring down the number of nationalised public sector banks to 12 from 27 in 2017.
“This is almost the right number of the banks which the country needs,” he told PTI.
The government on August 30 announced consolidation of 10 large public sector banks into four.
He described the government’s decision as a building block for achieving USD 5 trillion economy target.
“To support next level of growth, the country needed big banks. The mega merger announced on August 30 aims to achieve that objective. We will now have six mega banks with enhanced capital base, size, scale and efficiency to support high growth that the country requires to break into the club of middle income nations,” he said.
The consolidation will help create strong and globally competitive banks with economies of scale and enable realisation of wide-ranging synergies, he said adding that now they would have wider reach, stronger lending capacity and better products and technology to serve customers of new India.
Kumar, who spearheaded the exercise of cleaning up the banking sector, has several firsts to his credit. These include highest ever capital infusion in the banking history and successful completion of the first three-way merger with Bank of Baroda as the anchor bank.
As a result of various initiatives taken by the finance ministry, the banking sector witnessed a reversal in the deteriorating bad loan situation with reduction of NPA by Rs 1.06 lakh crore and record loan recovery of Rs 1.21 lakh crore in the last fiscal.
The cleaning up exercise undertaken by him has now started showing result with 14 out of 18 public sector banks posting profit in the first quarter of the current fiscal.
Earlier this year, Bank of Baroda merged Vijaya Bank and Dena Bank with itself to become the second largest public sector lender. State Bank of India had merged five of its associate banks – State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad and also Bhartiya Mahila effective April 2017.