NEW DELHI: The government has cleared for take-off a more liberal civil aviation policy , kick-started consolidation among public sector banks by backing SBI’s proposed merger of five associate banks with itself and approved 10% stake sale in HUDCO in a fresh push to reforms.The big Cabinet decisions on Wednesday came a day after the government moved decisively on GST, igniting stock markets that celebrated the steps that were widely anticipated after the recent assembly polls and Rajya Sabha elections.The new aviation policy junks the so-called 5/20 rule and gives a leg up to greater connectivity by providing incentives for flying to cities that are not on the air map.SBI had sought the government’s nod for merging five associate banks — State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore — and Bharatiya Mahila Bank with itself.“The government has taken note of the merger proposal,” a senior government official told ET, requesting not to be identified. The proposal does not need to be approved by the Cabinet, he said. The government’s support nonetheless puts the process on fast track, signalling the beginning of the process of consolidation among state-run banks.The Cabinet Committee on Economic Affairs approved 10% disinvestment in Housing & Urban Development Corporation Limited (HUDCO) through an initial public offering, or IPO.SBI’s stock rose 3.9% on the Bombay Stock Exchange compared with the previous close while its listed associates rallied 20% on a day the BSE Sensex ended the session with a gain of 1.25%.Airlines including Vistara and AirAsia India will soon be allowed to start overseas flights under the new policy that allows airlines to fly international even before they complete five years of domestic operations.ET had on March 9 first reported the rules that would replace the 5/20 norm. Under the new civil aviation policy, any domestic carrier can now fly international if it has a fleet of at least 20 aircraft and maintains about 20% of total capacity in the domestic sector at all times.The earlier rule required domestic airlines to have a fleet of at least 20 aircraft and five years of domestic flying experience to launch overseas flights. “The 20 aircraft rule will ensure that domestic connectivity in the country is not compromised even after airlines fly international,” said Civil Aviation Minister Ashok Gajapathi Raju. “According to the earlier rule, any airline would have taken all its capacity in the international sector but mandating them to maintain 20% capacity in India will ensure that domestic connectivity is never compromised,” he said.Officials said it was a tough task to find the middle ground because the incumbent carriers and the new airlines were ranged against each other and took opposing stands on the policy.While Ratan Tata, chairman emeritus of Tata Sons, took early aim by tweeting on February 22 that the older airlines were seeking “protectionism” and “preferential treatment”, the Federation of Indian Airlines, the main lobby group representing IndiGo, Jet Airways, SpiceJet and Go-Air, reacted strongly, claiming “reverse discrimination” if the 5/20 norm was removed. IndiGo founder Rahul Bhatia even accused Tata of “subverting the law”.With the new policy, the Modi government also intends to provide connectivity to smaller cities across the country at a fare of Rs 2,500 per hour of flight. This will be achieved through subsidy, 80% of which will be provided by the Centre and the rest by the state governments.“There are a dozen defunct airports across the country where flight connectivity can immediately begin through regional flights,” said Aviation Secretary RN Choubey. The Cabinet cleared the civil aviation policy after a threehour meeting.Analysts welcomed the new policy. “As far as amendment to 5/20 rule is concerned, it should attract new entrants,” said Dhiraj Mathur, partner (aerospace and defence) at PwC India. “The requirement of 20 aircraft is reasonable because this issue was holding up policy release and the government has taken a call. Second, one can’t start international operations with one or two aircraft,” he said.The abolition of the 5/20 rule will not only augment supply and increase investments in the aviation sector but also create more choice for consumers, Mathur said.