Uday Kotak, CEO of Kotak Mahindra Bank, was positive about the major bank mergers announced by the Finance Minister, Nirmala Sitharaman, on Friday. He, however, sounded a note of caution as he said that the mergers should be executed well for them to create value. In a tweet on Saturday morning, he wrote:
Bank mergers. They create value if executed well. Our experience merging Ing Vysya bank with Kotak Mahindra bank is good. It took 2 years for seamless integration. Govt is smart in keeping same technology. Hence faster process. A Big Bang step!— Uday Kotak (@udaykotak) August 31, 2019
The Finance Minister, addressing a pressing conference on Friday, announced four mega-mergers of Public Sector Banks (PSUs). The first consolidation announced was that of Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank (UB), which will be led by PNB. This will result in the second-largest PSU Bank after the State Bank of India (SBI) and will have 11,437 branches. The second merger is of Canara Bank and Syndicate Bank which will be anchored by Canara Bank, making it the fourth-largest PSU Bank. The third merger is that of Union Bank of India, Andhra Bank and Corporation Bank, anchored by UBI and finally that of Indian Bank and Allahabad Bank which will be anchored by Indian Bank. In announcing the mergers, the banks that are comparatively bigger and stronger are acquiring the ones which are based in a particular location or are comparatively weaker, in a manner so as to enhance synergies. The mergers announced on Friday, along with the one announced in 2018, takes the total count of PSU banks from 27 in 2017 to 12.
In a bid to boost the economy, the Finance Ministry has recently announced reforms in multiple sectors of the economy with the banking reforms being the latest. Last week, the Ministry announced a partial rollback of the enhanced super-rich tax on foreign and domestic equity investors. The government also announced exemption for startups from 'angel tax', a package to address distress in the auto sector and upfront infusion of ₹70,000 crore to public sector banks. The tax levied on long term and short term capital gained has been withdrawn. In another announcement on Wednesday, the government cleared 100% FDI in coal mining and 26% FDI in digital news media.