Banks merger reflects govt resolve to address economic slowdown: India Inc

New Delhi: The government's move to consolidate public sector banks indicates its resolve to address the slowdown in GDP growth, as the country's economy expanded at its weakest pace in over six years in the April-June quarter of 2019-20, industry said on Friday.

"Well this certainly ruined my Friday & will dampen the weekend. A lot of work to be done. But I remain steadfastly optimistic. Was pleased to see the bank consolidation announced by @nsitharaman. A 'reform a week' is just the kind of tonic we need...," Mahindra Group Chairman Anand Mahindra tweeted.

Now, with the government and the Reserve Bank having common prescription, the economy should bottom out soon and things should improve in the coming quarters, Assocham President B K Goenka said.

Goenka said these mergers would result in better banking to customers, more credit to the industry and agriculture, professional governance structure and a greater autonomy and accountability of the bank boards.

Commenting on the consolidation exercise, Ficci President Sandip Somany said the decision reflects the government's commitment to provide the country the financial base on which we can grow and move towards the $ 5 trillion mark.

"The pace of expansion of GDP and GVA in Q1 FY2020 was resoundingly lower than forecast, driven by a collapse in manufacturing GVA growth, even as the performance of most of the other sectors was largely along expected lines," Aditi Nayar Principal Economist ICRA Ltd said.

Ranen Banerjee, Leader- Public Finance and Economics, PwC India said while the situation may not be as bad given the headwinds the economy is facing, this will further dent sentiment and put downward pressure on consumption.

Bank consolidation is a good move from government towards improving efficiency of the PSBs, Prakash Agarwal, Head-Financial Institutions, India Ratings and

Research said.