In a sweeping move to overhaul India's banking system, Finance Minister Nirmala Sitharaman on Friday announced four big Public Sector Bank mergers. Rolling out the second set of economic reforms, the Finance Minister announced the merger of Punjab National Bank with Oriental Bank of Commerce and United Bank. She also listed the enhanced network of branches due to the merger. Listing the advantages due to this move, FM Sitharaman has said that there will be great cost reduction due to network overlaps and cost-saving for the joint ventures among others. India will now have 12 Public Sector Banks from 27 Public Sector Banks after the merger.
"The large capacity of one bank, the technological capacity of the other bank and the strong deposit franchise will be merged together. Punjab National Bank, Oriental Bank of Commerce and United Bank will be brought together. They will form the second biggest PSB with a business of Rs. 17.95 lakh Crores, approximately 1.5 times than that of Punjab National Bank. They will the second largest network branch of 11,437 branches throughout the country," she said.
She listed the additional advantages saying, "This will give us a high CASA and higher lending capacity. There will be large saving in cost-reduction potential due to network overlaps, cost-saving and income ventures for the joint venture subsidiaries. We have taken care that the platform they use is compatible together. This will help in facilitating bank operations without customer disruption."
The Finance Minister announced the second merger of banks -Canara Bank and Syndicate Bank. Sitharaman announced that they will form the fourth largest PSB with an enhanced business. They will have the third-largest combined network of branches. She assured that as both banks operate on similar platforms, their merger will be seamless.
"The second merger of banks are from the South - Canara Bank with Syndicate Bank. They will be the fourth largest PSB with a combined business of Rs.15.2 lakh Crores, approximately 1.5 times than that of Canara Bank. This will be the third-largest network of branches in India with 10,342 branches. This holds a large cost reduction due to network overlaps. It will have similar consolidation features as they come from the same region. They too will be merged without customer disruption," she said.
Announcing the fifth-largest PSB merger, Sitharaman announced, "Union Bank of India and Andhra Bank will be merged with Corporation Bank. This will become the fifth-largest PSB with a business of Rs. 14.95 lakh Crores, approximately 2 times than that of Union Bank of India. This will form the fourth largest bank in terms of a network of branches with 9,609 branches. Their business will increase twice to about 4.5 times of other banks. Large cost-reduction due to network overlaps, cost-saving for JVs will be seen. All three banks have a similar platform, hence will have no customer disruption."
Sitharaman also announced the fourth merger -Indian Bank with Allahabad Bank. She pointed out that this merger will have a pan-India presence in East, North, and South. She also listed similar advantages of the merger. These mergers will be the second-largest merger after SBI was merged with its nine subsidiaries in 2017.
"Indian Bank has been merged with Allahabad Bank. This will become seventh-largest PSB with a business of Rs. 8.08 Lakh Crores, approximately 1.9 times than that of Indian Bank. This bank has a nationwide presence in the South, North, and East. There will be a doubling of business size due to complimentary networks. These banks have similar platforms and we expect seamless consolidation without customer disruption," she added.
Apart from the major bank mergers, Sitharaman has also announced that selection of PSB MDs will be now opened to the market. "Selection at arm's length through Bank Board bureau. No selections are going to be politically interfered with. Managing directors of major Public sector Banks (PSBs) will happen through the market. They will be selected from a wider pool. The MD selection has been opened up to the wider market," she said.