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Nirmala Sitharaman has set for Major merger of banks!

The past events collated after the KYC scam, Nirmala Sitharaman is now set foot to merging banks. Canara Bank and Syndicate Bank to be merged; Union Bank, Andhra Bank and Corporate Bank to be merged.

Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank of India to be merged; Indian Bank and Allahabad Bank to be merged. The government made closure on the infusion of PNB(public sector banks).

A total of Rs. 55,000 crore was infused accordingly:

  • PNB ( ₹16,000 crore),
  • Union Bank of India ( ₹11,700 crores),
  • Bank of Baroda ( ₹7000 crores),
  • Indian Bank ( ₹2500 crore),
  • Indian Overseas Bank ( ₹3800 crores),
  • Central Bank ( ₹3300 crores),
  • UCO Bank ( ₹2100 crore),
  • United Bank ( ₹1,600 crores)
  • Punjab and Sind Bank ( ₹750 crores).

A peak in history (2018)

Last year, the government had approved the merger of Vijaya Bank and Dena Bank with Bank of Baroda (BoB) that become effective from April 1, 2019. In 2017, the State Bank of India absorbed five of its associates and the Bharatiya Mahila Bank.

Financial highlights:
  1. More stability to set in with enhanced risk appetite and strong national presence.
  2. Indian Bank to be merged with Allahabad Bank (anchor bank – Indian Bank)

Nirmala Sitharaman has set for Major merger of banks!

Read More: Best financial takeaways from 2019

  1. Consolidated Indian Bank and Allahabad Bank to be 7th largest public sector bank with Rs 8.08 lakh crore business (anchor bank – Indian Bank)
  2. PNB, OBC and United Bank to be merged (PNB will be the anchor bank)
  3. Union Bank of India, Andhra Bank and Corporation Bank to be merged (anchor bank – Union Bank of India)
Budgeting for more business!
  1. Consolidated Union Bank of India, Andhra Bank and Corporation Bank to be 5th largest public sector banks with ₹6 lakh crore business
  2. Canara Bank and Syndicate Bank to be merged
  3. Consolidated Canara Bank and Syndicate Bank to be 4th largest public sector bank with ₹2 lakh crore business.

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PSUs
  1. 8 PSU banks have so far launched repo rate-linked loans
  2. Loan tracking mechanism in PSU banks is being improved for the benefit of customers

Nirmala Sitharaman has set for Major merger of banks!

  1. Since last Friday, 4 NBFCs have found liquidity support through PSU banks
  2. For NBFCs, partial credit guarantee mechanism has already been implemented
  3. Govt working on banking reforms

Read More: 6 Ways to Make Money While You Sleep!

Best Practises
  1. Gross NPAs of PSU banks have come down
  2. Provision coverage ratio highest in 7 years
  3. Best practices of each bank in the consolidation of Vijaya Bank, Bank of Baroda and Dena Bank have been absorbed
  1. Non-official directors to perform role analogous to independent directors
  2. Public sector banks enabled to do succession planning
  3. Bank boards were given the flexibility to fix the sitting fee of independent directors
  4. Bank of India, Central Bank of India will continue as public sector banks

A week before the announcement hit the screens, Sitharaman had unveiled the chain of measures that ranged from a rollback the additional surcharge on foreign portfolio investors (FPIs).

It also involved domestic investors introduced at the Union Budget in July. She ordered to an immediate recapitalization of public sector banks (PSBs) and a bouquet of measures to ease a taxpayers’ woes.

Read More: The Key to Money Management!

How is the merging going to help us?

  • Logic suggests the mergers will lead to a higher scale of operations, resulting in improved efficiency and lower costs.
  • Mergers may make it difficult for private banks to gain faster market share as most anchor banks are large or will be larger post-merger,” says Pritesh Bumb, Research Analyst at Prabhudas Lilladher.

 

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