The process will be triggered by the merger of Union Bank of India with Bank of India. The merger proposal has received in principle approval from the Reserve Bank of India and the finance ministry is expected to give its green signal in the budget.
The finance minister P Chidambaram in his meeting with the chief executive officers of public sector banks on January 27 had discussed issues relating to consolidation in the public sector banks, managerial autonomy, corporate governance and progress in credit off take.
The roadmap for consolidation will incorporate the suggestions of CEOs and Indian Bank's Association, said sources.
The ministry is of the view that regional synergies and similar technology platforms are the underlying factors that might lead to merger of banks, said sources.
Union Bank of India and Bank of India share a common technology platforms -- core banking solution from Infosys (Finacle).
Bank of India chairman M Venugopalan is set to step down on April 30 when his term expires. Union Bank of India chairman Cherian Verghese will take charge of merged entity said, banking sources. Venugopalan will take over as the head of Federal Bank.
The merged entity will have an asset base of over 1,43,000 crore (Rs 1430 billion) and will be the second largest commercial bank in the country, over taking ICICI Bank. It will have a network of 4,582 branches and over 68,000 employees.
However, post merger the new entity will have to close down about 200 branches while it will have to open around 500 new branches to tap new areas, said banking sources.
Bank of India's second public issue worth Rs 100 crore (Rs 1 billion) is expected to hit the market by April 2005.
The bank's credit portfolio is growing by around 18 per cent year on year to support this growth and maintain the banks capital adequacy ratio above the 12 per cent mark the bank will have to raise fresh capital, said Venugopalan.
The banks capital adequacy ratio as on December 31, 2004 stood at 11.3 per cent.