Friday, 12 August 2022

Reserve Bank of India reduces PSBs from 27 to 12 through mergers

5 min read

Indian Finance Minister Nirmala Sitharaman announced that several public sector (PSB) banks would be consolidated to strenthen state-owned lenders and turn them into global sized banks. 10 public sector banks would be merged into four after the reform announced Sitharaman.

Sitharaman said the government will front-load $13.495 billion (INR 70,000 crore) capital infusion into public sector banks to nudge an additional lending of $69.735 billion (INR 5 trillion). In financial year 2019, the government had infused more than $13.947 billion (INR 1 trillion) in public sector banks.

Finance minister Nirmala Sitharaman announced the merger of Punjab National Bank, Oriental Bank of Commerce and United Bank to create India's second largest bank with a size of $251 billion(INR 18 trillion), a week after announcing a slew of measures to boost consumer and investment confidence.

The other merger will be between Canara Bank and Syndicate Bank, which will make the fourth-largest bank, with $211 billion (INR 15.2 trillion) business.

Also, Union Bank will be merged with Andhra Bank and Corporation Bank to build India’s fifth-largest public sector bank with $203 billion (INR 14.59 trillion) in business.

Indian Bank will be merged with Allahabad Bank to make India’s seventh-largest PSB with a business of $112 billion (INR 8.08 trillion).

Sitharaman said the earlier merger of Bank of Baroda, Vijaya Bank and Dena Bank led to enhanced customisation and rationalisation of operations without any retrenchment. CASA (current and savings account) growth is 6.9% in the June quarter; retail loan growth is 20.5%, while profitability is around $99 million (INR 710 crore).

Sitharaman said gross NPAs of PSBs have come down to $110 billion (INR 7.9 trillion) in the March quarter of the previous fiscal year, from $120 billion (INR 8.65 trillion) in the preceding December quarter. Out of 18 public sector banks, 14 are in profit-earning situation.

Financial Services Secretary Rajiv Kumar, who was also present at the press conference, said there was no retrenchment in the past consolidations, including of SBI, and service conditions of employees improved.

"Employees will only benefit with the mergers," he added.

Earlier this year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with the State Bank of India.

Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab and Sind Bank will continue to function as earlier as they have strong "regional focus", Sitharaman added.

Re-disseminated by The Asian Banker


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