Economy

Cabinet green signal for amalgamation of 10 public seco banks

Our Bureau New Delhi | Updated on March 04, 2020 Published on March 04, 2020

On course to meet April 1 implementation date, says FM Sitharaman

The consolidation of 10 public sector banks into four got a push on Wednesday with the Union Cabinet approving their respective schemes of amalgamation.

With this approval, the banks concerned are on course to implement the amalgamation with effect from April 1, Union Finance Minister Nirmala Sitharaman told reporters after a Cabinet meeting.

She also clarified that no regulatory forbearance is being contemplated to enable this mega consolidation and the entire work is on track to be completed by April 1.

The Finance Minister also said that the government has carefully studied the issues arising from the earlier implemented amalgamation of Vijaya Bank and Dena Bank with Bank of Baroda (BoB) and factored in the learnings in the latest mega consolidation move.

The mega bank consolidation move was announced in August-end last year to create a stronger public sector bank framework to support a $5-trillion economy by 2023. The number of public sector banks will come down from 27 in 2017 to 12.

Under the latest round of mega merger, Oriental Bank of Commerce and United Bank of India are to be amalgamated into Punjab National Bank (PNB).

While Syndicate Bank is proposed to be amalgamated into Canara Bank, Andhra Bank and Corporation Bank are to be amalgamated into Union Bank of India. Allahabad Bank will be amalgamated into Indian Bank.

After the Cabinet approval for the scheme of amalgamation, the stage is now set for the concerned bank Boards to decide on the swap ratio and then go in for shareholders’ approval.

With less than two months to go for the implementation date, the Cabinet has also given its nod for a shorter window for approval of minority shareholders to the scheme of amalgamation, sources said.

Asked if the government was readying the next batch of candidates like UCO Bank and Punjab & Sind bank for consolidation, Sitharaman replied in the negative. There is no such plan as of now, she said.

The latest round of amalgamation would result in creation of seven large PSBs with scale and national reach with each amalgamated entity having a business of over ₹8-lakh crore.

It would also help create banks with scale comparable to global banks and capable of competing effectively in India and globally.

Greater scale and synergy through consolidation would lead to cost benefits which should enable the PSBs enhance their competitiveness and positively impact the Indian banking system.

In addition, consolidation would also provide impetus to amalgamated entities by increasing their ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity.

The adoption of best practices across amalgamating entities would enable the banks improve their cost efficiency and risk management, and also boost the goal of financial inclusion through wider reach.

Further, with the adoption of technologies across the amalgamating banks, access to a wider talent pool, and a larger database, PSBs would be in a position to gain competitive advantage by leveraging analytics in a rapidly digitalising banking landscape.

Published on March 04, 2020

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