Nirmala Sitharaman announced mergers of various banks into 'consolidated banks' (File)

The public sector banks will be allowed to appoint chief risk officers at market-linked compensation to attract best available talent, Finance Minister Nirmala Sitharaman said today, announcing a host of reforms including mergers for the state-run lenders. This was the second announcement within a week by the finance minister to revive the economy which is facing a slowdown.

"Public sector banks' boards are empowered to recruit chief risk officer at market-linked compensation to attract best available talent," she said.

The chief risk officer in financial institutions is an executive responsible for risk assessment of investments and lending.

India's economy expanded at its slowest pace in over six years, government data showed on Friday. Growth in the country's gross domestic product (GDP) stood at 5 per cent in the first quarter of current financial year (2019-20), compared with 5.8 per cent in the previous quarter, and 8.0 per cent in the quarter ended June 30, 2018.

Many economic sectors, including the auto sector, have been under stress due to the economic downturn. Reports say thousands of jobs have been lost in the auto sector.

Last week, Ms Sitharaman had announced the government's decision to scrap the higher tax surcharge on foreign portfolio investors (FPIs).

Today, she announced a slew of measures to extricate the public-sector banking sector from the crisis caused by the bad loans. She announced the mergers of many public sector banks into what she called a "consolidated banks".

Punjab National Bank, Oriental Bank of Commerce and United Bank would be merged into a consolidated bank, which will become the second largest state-controlled bank in the country.

The Finance Minister also announced three other PSU bank amalgamation plans: Canara Bank and Syndicate Bank; Union Bank of India, Andhra Bank and Corporation Bank, and Indian bank with Allahabad Bank.

After the mega PSU bank consolidation drive, there will be 12 public sector banks in the system, as against 27 in 2017, the Finance Minister added.