Friday, 05 June, 2020


Coastal banks to merge: Syndicate with Canara; Corporation with others

In place of fragmented lending capacity with 27 PSBs in 2017 now there will be only 12 state-run banks post consolidation Sitharaman said In place of fragmented lending capacity with 27 PSBs in 2017 now there will be only 12 state-run banks post consolidation Sitharaman said
Conrad Doyle | 30 August, 2019, 21:28

The merged entity will become the country's second largest public sector bank.

Sitharaman also announced the merger of Union Bank of India with Andhra Bank and Corporation Bank to make it the fifth-largest public sector bank and the merger of Indian Bank with Allahabad Bank to be the seventh-largest public sector bank with business of Rs 8.08 lakh crores. In 2018, Centre had approved the merger of Vijaya Bank and Dena Bank with Bank of Baroda (BoB). "Canara Bank will be merged with Syndicate Bank".

While addressing Sitharaman said, "We need to lay a strong foundation for the financial sector, but also make sure that we give banks a good governance model".

Business Standard reported Sitharaman will meet executives of 10 PSU banks.

In 2017 the government merged State Bank of India with its associate banks, and this year it merged Bank of Baroda with some smaller peers.

The total number of banks is expected to reduce even further to around only four or five as per the Indian government's plans for the sector.

Giving a break-up of which bank gets how much, the Finance Minister said that the PNB would get Rs 16,000 crore and Rs 11,700 crore will go to the Union Bank Of India.

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. Bigger, fewer and healthier banks will be in a better position to finance new projects and support the government's aim of making India a $5 trillion economy by 2024.

Among the other mergers, Canara Bank and Syndicate Bank will be combined to form the fourth-largest PSB, with a business of Rs 15.20 lakh crore. Bank of Maharashtra (BoM) in the west will continue with Rs. 2.34 lakh crore of business, along with Punjab & Sind Bank, with a business of Rs. 1.71 lakh crore.

Sitharaman said that these infusions would be for credit growth and meeting regulatory needs. The finance minister also said that the merger would not result in any retrenchment but rather improve the benefit of the employees. In 2018, the government made a decision to merge the Bank of Baroda with the Vijaya Bank and the Dena Bank.

"The mergers have been done selectively to ensure that the stronger banks are not impacted due to the weaker banks in the merger process", said Siddharth Purohit, a research analyst at SMC Institutional Equities.

The government also allowed the Life Insurance Corporation to acquire 51 per cent in the IDBI Bank.

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