Money & Banking

Was the exclusion of four banks a political gameplan?

K. Ram Kumar Mumbai | Updated on August 30, 2019 Published on August 30, 2019

Political considerations could possibly have been at play in the case of four out of six public sector banks that have been excluded from the mega merger announced by the governmenton Friday.

For example, with Maharashtra Assembly elections scheduled to take place in October, Bank of Maharashtra (BoM) may have been left out of the scheme of things vis-a-vis amalgamation.

To escape backlash

A merger announcement involving BoM, which is the convener of the State-Level Bankers’ Committee (SLBC), at this stage could have given the Opposition parties a stick to beat the ruling party with during election campaign. SLBC is a consultative and co-ordination body of all financial institutions operating in each state.

With two Kolkata-headquartered public sector banks (PSBs) – Allahabad Bank and United Bank of India – set to be merged with other larger banks, the government would have felt the need to ensure that at least one PSB (UCO Bank) continues to be headquartered in India’s largest city in the East, which is the hotbed of trade union activities. Moreover, this decision comes in the backdrop of the BJP trying hard to make inroads into the State.

Allahabad Bank and United Bank of India are proposed to be merged with Chennai-headquartered Indian Bank and Delhi-headquartered Punjab National Bank, respectively.

Sources reasoned that Delhi-headquartered Punjab & Sind Bank could have been left out of the mega PSB merger as the BJP did not want to disturb its political equation with ally Shiromani Akali Dal and rub the powerful Shiromani Gurudwara Prabhandak Committee, which controls all historical Gurudwaras in the country, the wrong way.

Chennai-headquartered Indian Overseas Bank (IOB) may have been kept out of the mega PSB merger as it is not only weighed down by huge bad loans but also because there could have been adverse reaction from local political parties in Tamil Nadu.

Two large PSBs – Bank of India and Central Bank of India – have not been included in the latest round of consolidation, probably because they are reeling under huge bad loans.

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Published on August 30, 2019
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