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Mega Public Sector Bank Merger

FM Nirmala Sitharaman announces mega public sector bank merger; 10 banks amalgamated into 4 entities. This mega consolidation drive will leave only 12 major public sector banks in the country from the earlier count of 27 in 2017.

  • State Bank of India
  • Punjab National Bank with Oriental Bank of Commerce and United Bank.
  • Canara Bank with Syndicate Bank
  • Union Bank of India with Andhra Bank and Corporation Bank
  • Indian Bank with Allahabad Bank
  • Bank of India,
  • Central Bank of India,
  • UCO Bank,
  • Bank of Maharashtra
  • Punjab and Sindh Bank

Oriental Bank of Commerce and United Bank will be merged into Punjab National Bank. The consolidated entity will be the second-largest PSB with a business of Rs 17.95 lakh crore, at least 1.5 times of the current size of PNB.

Two banks coming from the South – Canara Bank with Syndicate Bank will be merged. The combined size of the business will be Rs 15.2 lakh crore, roughly 1.5 times that of Canara Bank currently. The combine will have the third-largest branch network in the country with 10,342 branches.

Andhra Bank and Corporation Bank will be merged into Union Bank of India. This will mean a combined business of Rs 14.59 lakh crore, roughly twice the size of UBI currently. This will make it the fourth largest in terms of a network of branches with 9,600 branches.

The fourth one will be the consolidation of Indian Bank with Allahabad Bank making it the seventh-largest with a total business of Rs 8.08 lakh crore, approximately 1.9 times the current size of Indian Bank.

In a media briefing to announce the various measures taken to improve the efficiency of the banking system in the country, FM Sitharaman said the mega-merger plan will result in large cost reduction arising from network overlaps.

Bank of India, Central Bank of India, UCO Bank, Bank of Maharashtra, and Punjab and Sindh Bank will continue to operate as before and will be provided necessary support from the government.

The government has taken care that the technological platforms used by the banks are compatible and enable a quick realization of gains without any customer inconvenience or disruption in services.

Government’s plan to Empower PSU Banks

Finance Minister on August 30, announced measures to improve the governance of public sector banks (PSBs). To empower the PSB boards further, Sitharaman announced that the board committee of PSBs can appraise the performance of position of general manager and above.

PSBs can also recruit a Chief Risk Officer from the market, and the banks will be given freedom to hire the officer at market rates to ensure quality personnel. These boards can also decide a system of individual development plans for all senior executive positions.

To strengthen the board committee system, Sitharaman said that flexibility will be given to boards of large PSBs to enhance sitting fees of Non-Official Directors (NODs). These boards will also be given the mandate to reduce/rationalise board committees. Sitharaman also announced that MCB loan sanction thresholds be enhanced by up to 100 percent.

To enhance the effectiveness of NODs, they will perform a role analogous to independent director. Boards will also be given a mandate for the training of directors, and the NOD’s performance will be reviewed annually on a peer review basis. To bring about development in leadership, the strength of Executive Directors’ has been raised to 4 in lager banks.
Sitharaman announced the merger of 10 PSBs to form four new entities merger of Canara Bank with Syndicate Bank; United Bank of India and Oriental Bank of Commerce with Punjab National Bank; Andhra Bank and Corporation Bank with Union Bank of India, and the merger of Allahabad Bank with Indian Bank so as to strengthen these public sector banks (PSBs) and help achieve the target of a $5 trillion economy.

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Mega Public Sector Bank Merger

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