Finance Minister Announces Merger of 10 Public Sector Banks into Four

New Delhi, August 30, 2019:

Union Finance Minister Nirmala Sitharaman on Friday announced mega Public Sector Undertaking (PSU) bank merger.

The merging will include PNB, OBC, United Bank in order to create the second-largest govt bank in the country in a bid to realize Modi’s $5 trillion economy that was announced during the presentation of the union budget this year.

The government has also decided to merge seven other PSU banks into three big lenders.

Nirmala Sitharaman said that Union Bank, Andhra Bank, and Corporation Bank will be merged to create 5th largest PSU bank entity of India, while Canara Bank will be merged with Syndicate Bank to form 4th largest government bank. Simultaneously, Indian Bank will be merged with Allahabad Bank to form the 7th largest state-run bank in India.

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The Finance Minister terming this merger as ‘Nextgen PSBs’, said that the consolidation of the public sector banks is being done to achieve national presence and global reach.

These merged banks, including SBI and amalgamated banks as well as BoB, will form 82% of the total PSB business and 56% of the commercial banking business.

The decision came up after Sitharaman announced a set of reforms in this month. Earlier, five associate banks and Bharatiya Mahila Bank were merged with State Bank of India under the first term of Modi governance. On April 1, 2019, Dena Bank and Vijaya Bank were merged with Bank of Baroda.

However, the Reserve Bank of India (RBI) said that larger banks are labour cost-efficient relative to their smaller counterparts.

The RBI in a report said, “This finding provides an additional rationale for recent mergers of banks, both amongst PSBs and PVBs (Private Banks) and suggests that further avenues of consolidation in the banking sphere may be explored.”

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