Finance Minister announces four mega bank mergers

Bank recap

Punjab Nationwide Financial institution, Oriental Financial institution of Commerce and United Financial institution could be merged right into a consolidated financial institution, which is able to grow to be the second largest state-controlled financial institution within the nation.

"The merged bank will business of Rs 17.95 lakh crore".

The third merger will be between Andhra bank, Union Bank of India (UBI) and Corporate Bank to create the fifth largest PSB with a combined business of Rs 14.59 lakh crore.

Sitharaman said 10 PSU banks were being merged to form four entities.

Consolidation among public sector banks has been on the agenda for the NDA government since 2014, when it first came into power.

Briefing media persons in New Delhi today, Finance and Corporate Affairs Minister Nirmala Sitharaman said, there is a need to strengthen the foundation of the banking sector.

"To make management accountable to board, board committee of nationalised banks to appraise performance of general manager and above including managing director", she said.

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For example, with Maharashtra Assembly elections scheduled to take place in October, Bank of Maharashtra (BoM) may have been left out of the scheme of things vis-a-vis amalgamation. Bank of Maharashtra (BoM) in the west will continue with Rs. 2.34 lakh crore of business, along with Punjab & Sind Bank, with a business of Rs. 1.71 lakh crore.

The move comes just a year after the government undertook a pilot-of-sorts, merging three banks - Bank of Baroda, Vijaya Bank and Dena Bank.

The Finance Minister further informed that specialised agencies have been set up to monitor every loan which is over Rs 250 crores. "It will become the fourth largest public sector bank with business of Rs 15.2 lakh crore".

"The consolidation in the banking sector will create higher efficiencies through better utilization of capital, greater credit disbursal, focused customer service and global expansion opportunities", said Rashesh Shah, chairman and CEO, Edelweiss Group.

Sitharaman, who had announced PSU bank recap of Rs 70,000 crore in the budget last month, also announced recapitalisation amounting to Rs 55,250 crore for the PSU banks. In 2017, the State Bank of India absorbed five of its associates and the Bharatiya Mahila Bank.

Sitharaman said that the government has recognized that consumption needs a boost.

The Minister also said that to avoid fugitive Nirav Modi like frauds in the PSBs, the SWIFT messaging system has now been linked with the core banking system. "Canara Bank will be merged with Syndicate Bank".

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