PSBs down to 12 from 27 after mega merger

In a mega consolidation plan for public sector banks, the government on Friday announced the merger of 10 state-owned lenders into four entities with an aim to strengthen their balance sheets and make them globally competitive.

The move is aimed at arresting one of the worst economic slowdowns in the country. Only robust banks can help increase lending activities and re-start the investment cycle, whose muted growth is one of the reasons for the economic slump.

The exercise has reduced the number of state-owned banks to 12 from 27.

According to the plan announced by Finance Minister Nirmala Sitharaman, Oriental Bank of Commerce (OBC) and United Bank would be merged with the country’s second-largest public sector lender, Punjab National Bank. The merged entity will have Rs 19.94 lakh crore of business and over 11,000 branches across the country.

Similarly, Union Bank of India, Andhra Bank and Corporation Bank would merge to become the fifth-largest public sector lender with Rs 14.59 crore of business.

And, Indian Bank and Allahabad Bank would be consolidated to create Rs 8.08 lakh crore of business. The merged entity is expected to be the seventh-largest PSB in the country.

Two Karnataka-based banks — Canara Bank and Syndicate Bank — would be merged to create the fourth-largest public sector bank in the country with Rs 15.2 lakh crore of business and the third largest branch network. Sitharaman said there would be no job losses due to the merger of lenders.

However, when the first in the series of the PSB mergers took place in 2017 and State Bank of Mysore and five other associate banks merged with State Bank of India, many employees were asked to retire.

Bank of India and Central Bank of India continue to remain independent national banks.

The finance minister said the consolidation would not only ensure strong national and global presence of India’s state-owned banks but also reduce the cost of lending and enhance their risk appetite.

Among administrative reforms in banks, she said the bank boards will be given autonomy and would be enabled to do succession planning.

To make the management accountable to the board, the board committee of nationalised banks will appraise the performance of the general manager and above to it.

To make the span of control manageable in large PSBs after consolidation, boards have been given the flexibility to introduce CGM level as per business needs.