NRI Dunia
Think Outside The Box

Ten Public Sector banks merged into Four

Finance Minister Nirmala Sitharaman today announced one of the largest shake-ups in the financial sector to lay a firm base for a $5-trillion economy by 2024.

Addressing a press conference, she announced the merger of 10 public sector banks (PSBs) into four. Two standalone banks will strengthen their national presence and four PSBs, including Punjab & Sind Bank, will boost their regional footprint.

This is the third round of mergers announced by the government and the first under Modi 2.0.
In 2017, the State Bank of India was merged with five of its associate banks and Bharatiya Mahila Bank. In 2018, Bank of Baroda was merged with Vijaya Bank and Dena Bank to make it the second largest PSB. Sitharaman said the mergers are intended to usher in “NextGen banks”.

While the minister set her sight on future to enhance capacity of banks to lend and raise resources, country’s current economic growth slumped to a six-year low of 5% in the April-June quarter of the current fiscal. The merger of Punjab National Bank, Oriental Bank of Commerce and United Bank will now create the second-largest PSB after the SBI with business of Rs 17.95 lakh crore. The merged SBI is way ahead with Rs 50 lakh crore business.

The merger of Canara Bank with Syndicate Bank will form the fourth-largest PSB with business of Rs 15.2 lakh crore. The Union Bank of India merges with Andhra Bank and Corporation Bank to become the fifth-largest PSB. The merger of Indian Bank with Allahabad Bank will form the seventh-largest PSB with business of Rs 8.08 lakh crore.

The government also announced that Bank of India (sixth largest) and Central Bank of India will remain standalone , but their national presence will be enhanced.

It was also decided to enlarge the regional presence of four banks—Punjab & Sind Bank, UCO Bank, Bank of Maharashtra and Indian Overseas Bank—while allowing them to retain their national presence.

Sitharaman and Finance Secretary Rajiv Kumar said there would be no disruption for customers while care would be taken to ensure high CASA (ratio of deposits in current sand savings accounts) that could give them benefits of a higher interest rate.

After the consolidation of these banks is examined by the Reserve Bank of India (RBI) and approved by their respective boards, the country will have 12 PSBs, down from 27 earlier. The minister also announced measures to improve governance and calibrated risk-taking appetite of PSBs.

Building NextGen banks: Nirmala

“Banks with a strong national presence and global reach is what we want… After the merger, India will have 12 solidly present, well-consolidated, energised, adequately capital-endowed banks… We are trying to build NextGen banks.” Nirmala Sitharaman, Finance Minister

‘Black Day’ CALL
The All-India Bank Employees Association (AIBEA) has decided to observe “Black Day” on Saturday
“The proposals that the government has moved have no logic or rationale,”’ said the largest union of bank staff
The call comes despite assurance by the Finance Minister that there will be no retrenchments
Rs 52,250 cr govt to infuse in 10 banks to boost balance sheets
Number of PSBs

2017 : 27
2019 : 12