FM Nirmala Sitharaman takes up mega merger of banks

By Sreenivasa Rao Dasari  Published on  30 Aug 2019 1:17 PM GMT
FM Nirmala Sitharaman takes up mega merger of banks

New Delhi: Heralding a significant reforming initiative, Union Finance Minister Nirmala Sitharaman on Friday announced the mega-merger of 10 public-sector banks (PSBs) into four entities. Andhra Bank, Union Bank of India (UBI) and Corporation Bank will be one entity. After the massive PSB merger, India will have only 12 public-sector banks as against 27 earlier.

Oriental Bank of Commerce and United Bank of India will be merged with Punjab National Bank (PNB) and this would make PNB the second-largest PSB with a total business volume of Rs 17.5 lakh crore. The merger of Canara Bank or Syndicate Bank will make it a total business volume of Rs. 15.20 lakh crore and become the fourth largest PSB in the country. Indian Bank and Allahabad Bank will become one entity.

However, Punjab and Sindh Bank, Bank of Maharashtra and UCO Bank remain untouched in the reform plan of the NDA government. A week ago, Nirmala Sitaraman had announced a stimulus package to boost the Indian economy.

The Finance Minister further said that the gross non-performing assets (NPAs) in the domestic banking sector were at Rs 7.90 lakh crore as on March 2019.

“The merger would bring high CASA and higher lending capacity in the banking system. The technology platforms of the merged banks will be made compatible to ensure smooth functioning of banking operations,” Nirmala Sitaraman said.

The third consolidation will have the merger of Andhra Bank, UBI and Corporation Bank and this will make it a fifth largest PSB with a business volume of Rs. 14.59 trillion and a network of 9,609 branches.

“The merger results in a large cost reduction, cost savings for the subsidiaries of each merged entity and technology compatibility. The fourth consolidation will have Indian Bank and Allahabad Bank. This will create the seventh-largest PSB with a business volume of Rs. 8.08 trillion and this will be 1.9 times the current size of Indian Bank,” the Minister said further.

Prime Minister Narendra Modi-led NDA government in 2018 had merged Dena Bank and Vijaya Bank with Bank of Baroda (BoB), thus making it a third largest PSB by loans in the country.

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