Banking sector weekly wrap: Jet Airways on sale; RBI's woes over stressed assets and big ticket bank mergers

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26 Aug, 2025 12:21

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It's the start of FY20 and complications in massive debt resolution plans after the Supreme Court scrapped the central bank's circular out of the blue, and a lack of liquidity guidance from the policy review ahead of elections have thrown lenders into a tizzy. If this is a preview of things to come in future, banks are set for a roller-coaster ride this year.

As for customers, the wait for lower monthly loan installments just got longer while big ticket mergers in the banking space may need some adjustments on their part as well.

Lenders to Jet Airways invite bids for stake sale

The State Bank of India (SBI)-led consortium, on April 6, invited Expression of Interest (EoI) from prospective parties for acquiring a majority shareholding in the debt-burdened Jet Airways.

The window for submission closes on April 9, lenders said in a joint statement that also indicated recourse to "other options" if the stake sale did not meet their expectations.

RBI's worry on monetary policy transmission and bad loan resolutions

The Reserve Bank of India (RBI) reduced it's key policy rate by 25 basis points to 6 percent on April 4. This is the lowest since August 2017. Despite a cumulative easing of 50 basis points since February, lenders may not be able to pass on the entire benefit to customers as tight liquidity conditions will keep their cost of funds elevated. RBI Governor said that the central bank is working with lenders to issue guidelines on faster transmission of rate cuts to the end borrowers. The deadline for linking floating rate personal or retail loans to an external benchmark from April 1, was also deferred.

In a big blow to the RBI's authority as the banking regulator, the Supreme Court, on April 2, quashed it's February 12 circular on the resolution of stressed assets by stating it unconstitutional. The RBI Governor Shaktikanta Das, however, said that the apex court's order has not taken away any powers from the central bank but has asked them to be followed in a particular manner. This implies mandatory consultation with the central government for referring only specific cases under the Insolvency and Bankruptcy Code, instead of setting a strict generic time-bound procedure for all cases. Das said the RBI has started work on a revised framework in keeping with the directions of the highest court.

Lakshmi Vilas Bank to apply for regulatory approval for merger with Indiabulls Housing Finance

After obtaining board approval, Chennai-based Lakshmi Vilas Bank (LVB) will be applying for necessary regulatory seal for merger with Indiabulls Housing Finance (IBH). The non-banking financial company has been eyeing the banking space for a while now. It was one of the applicants to face rejection in 2013 when the RBI had allowed companies to apply for universal banking licence. Also, the promoter shareholding at 19.25 percent in the proposed merger plan, may not go well with the regulator. For LVB, the merger brings in the much needed capital support and a shot at achieving a pan-India presence to compete with large banks.

Dena Bank and Vijaya Bank merged with Bank of Baroda

Three state-run lenders—Bank of Baroda, Dena Bank and Vijaya Bank merged on April 1 to form the country’s third largest bank after SBI and HDFC Bank. The consolidated bank, named Bank of Baroda, has over 9500 branches, over 13,000 ATMs, 85,000 employees and 12 crore customers. Bank of Baroda said it has attempted to make the transition seamless for customers of the bank.