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India rolls out a special panel to help banks merge

Consolidation seen as key to ensuring weak lenders survive the country's bad-loan crisis

Finance Minister Arun Jaitley, right, is the first to chair the new 'Alternative Mechanism' panel that will nudge loss-making Indian state banks towards consolidation.   © Getty Images

MUMBAI/NEW DELHI The Indian government is determined to deliver the banking system from its bad loan mess through recapitalization -- while ensuring weak lenders survive the process.

Within a week of announcing a massive 2.11 trillion rupee ($32.4 billion) recapitalization plan for state-owned banking institutions, the government rolled out a panel that will scrutinize merger proposals for banks whose operations are likely to remain unsound even after fresh injections of capital. The Alternative Mechanism, as the panel is called, is intended to nudge banks toward mergers.

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