Addressing a press conference on Friday, Finance Minister Nirmala Sitharaman announced the merger of 10 public sector banks into 4 big banks. This follows a series of reforms announced in key areas like Foreign Direct Investment (FDI), automobile, taxation and so forth in the last few days, apart from her own announcements a week earlier wherein she had moved to reassure wealth creators with a slew of measures. She contended that bank consolidation would boost the availability of credit and would be a pathway to achieving the goal of $5 trillion economy. Also, she unveiled a set of governance reforms in public sector banks ranging from strengthening board committees to increasing accountability of top officials.
Punjab National Bank (PNB), Oriental Bank of Commerce and United Bank are being merged. This would be the second-largest bank in the public sector with a combined business of Rs.17.95 lakh. It is 1.5 times the current business of PNB. Overall, it will have 11,437 domestic branches.
Canara Bank and Syndicate Bank will be merged. The new merged bank would be the fourth-largest public sector bank garnering a total business of Rs. 15.20 lakh crore. It is 1.5 times the present business of Canara Bank. It will have 10,342 branches all over the country.
Union Bank of India, Andhra Bank and Corporation Bank was the third merger to be announced. In the public sector, this would be the fifth-largest bank with a total business of Rs.14.59 lakh crore. It will have 9609 branches.
The merger of Indian Bank and Allahabad Bank was the final one announced. With a gross business of Rs. 8.08 lakh crore, it would be the seventh-largest public sector bank. It shall have a combined total of 6104 branches.
The Finance Minister observed that after the merger concluded, only 12 public sector banks remained and that, the 4 new banks would garner about 82% of the total public sector banking business in India. She also assured that Bank of India and Central Bank of India would continue to function as separate banks on the national level. Sitharaman asserted that the regional dominance of the merged banks would be maintained. Similarly, Indian Overseas Bank, Bank of Maharashtra, UCO Bank, Punjab & Sind Bank would continue to function as usual.
The boards of the public sector banks have been empowered to ensure accountability of the management. Moreover, Chief Risk Officers will now be appointed from the market. The tenure of top-ranking officials has been enhanced. Additionally, individual development plans will be put in place for all senior executive positions, with a leadership programme being introduced. Sitharaman also declared that the fees of the non-official directors could be increased. She added that they would now function like independent directors. Finally, the Finance Minister revealed that the banks had been instructed to finish the consolidation process in a smooth manner.