Finance Minister Nirmala Sitharaman announces mega bank mergers

Nirmala Sitharaman

A day after the Centre's decision to merge 10 public sector banks into four entities, members of the All India Bank Employees' Association on Saturday staged a protest in Chennai against the government's move.

The latest consolidation move will slash the number of state-owned lenders to 12 from 27 in 2017, Sitharaman said, highlighting the banking reforms undertaken by the Narenda Modi government that have also included significant tidying-up of balance sheets.

"Punjab National Bank, Oriental Bank of Commerce and United Bank will be brought together and they shall form the second largest public sector bank with a business of Rs 17.95 lakh crore".

"Specialised agencies have been set up who are monitoring every loan which is over Rs 250 crores", she said, adding that loan recoveries have hit a recover level of Rs.1,21,076 crore.

The BJP government at the Centre had on Friday unveiled a mega plan to merge 10 public sector banks into four, to create fewer and stronger global-sized bankers as it looks to revive economic growth. While PNB will get approximately Rs 16,000 crore, Union Bank will receive Rs 11,500 crore, Bank of Baroda Rs 7,000 crore, Canara Bank Rs 6,500 crore, United Bank Rs 11,700 crore, Uco Bank Rs 2,100 crore, Indian Overseas Bank Rs 3,000 crore besides others. Indian Bank will be merged with Allahabad Bank.

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RA Sankara Narayanan, MD & CEO of Canara Bank said, "Combined entity will be 4th largest after the amalgamation". Large mergers that are used to bail out weak banks and are not market driven, only leave public shareholders short-changed, as was in the case of SBI or BoB. The government also announced Rs 55,250 crore upfront capital for credit growth and regulatory compliance to support the economy.

"When the size of a bank becomes big, then its business will also grow, resulting in more job creation". According to these, Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will be merged with their larger peer Punjab National Bank (PNB). In 2017, the State Bank of India absorbed five of its associates and the Bharatiya Mahila Bank. Kumar said bank boards will apprise the government of capital requirements and numbers finalised.

Suppose the merged entity retains all officers as it is, there will be overlapping of roles.

Announcing a slew of measures to empower the public sector banks, Nirmala Sitharaman said a board committee of nationalised banks will appraise the performance of general managers and higher positions.

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