Finance Minister Nirmala Sitharaman announced mega mergers of ten state-owned banks in four financial giants with the goal of triggering greater efficiencies and latent strength in the Indian banking sector with an eye to the realization of the $ 5 trillion government economy dream .
The largest of the four will be the merger of the Punjab National Bank with the eastern trade bank and the United Bank of India to create the second largest public sector bank in India (PSB) with a business of Rs 17.5 crores lakh. The new entity will also have the second largest branch network, said Sitharaman on Friday.
The idea was to combine the "great capacity" of the Punjab National Bank with the "technology-driven capacity" of OBC and the "strong concession of deposits" of the United Bank of India, said the finance minister.
Look | Finance Minister Nirmala Sitharaman announces 4 mega banking mergers
In the second merger, two large banks in the south of India, Canara and Syndicate Bank will be brought together to create the fourth largest public sector bank with a business of Rs 15.20 million thousands of lire. The merged entity will have the third largest branch network in India with 10342 branches. This merger will lead to significant cost reductions and greater synergy due to network overlap, said Sitharaman.
"The two banks have a similar culture and there will be a continuation of the service for customers without interruption as they both use compatible financial technology and will be able to integrate quickly," said the finance minister.
Union Bank of India will merge with Andhra & Corporation Bank
The third merger will combine Union Bank of India with Andhra Bank and Corporation bank in a single entity to create the 5th largest PSB which will be twice the Union Bank of India. The merged entity will have a business of Rs 14.9 lakh crore and will be the fourth largest, in terms of branch network, with 9609 branches.
In the fourth merger, Indian Bank will be united with Allahabad Bank to create the 7th largest PSB with a business of Rs 8.08 lakh crore. This merger, said Sitharaman, will have a national presence with its strong networks in the South, North and East. These three banks also had free technology, he said.
Merger objective: strong national presence and global reach
According to Sitharaman, "Strong national presence and global reach" was one of the objectives of the consolidation plan. "The 82% of all PSB activities and 56% of all commercial banking activities will now be with these entities," he said.
Last year, the government approved the merger of Vijaya Bank and Dena Bank with Bank of Baroda (BoB). In 2017 the State Bank of India absorbed five of its associates and the Bharatiya Mahila Bank.
Mergers, according to the finance minister, led to positive aspects, such as wider offers and greater customization, streamlined operations, no reduction of employees and return to the focus of key functions and the adoption of best practices.
"The growth in the current and savings account (CASA) ratio of 6.9 percent was solid after the merger, giving more liquidity to the new entity. The merger also resulted in a strong growth in retail loans of 20.5 percent. It has also increased profitability, "said Sitharaman and added that at least 38 market analysts unanimously considered that the market capitalization for the merged entity would reach the price of 51,000 Rs by August 2020.
"We are trying to build next-generation banks," he said.
30 Aug 2019 17:14 IST