Mega consolidation of PSBs to overhaul banking space

Special Correspondent (New Delhi): Finance Minister Nirmala Sitharaman in Delhi, on Friday, announced the merger of PSBs to bring reform in the banking sector. This integration will reduce the total number of public sector banks from 27 to 12, widen their network and enhance the global reach.

There will be an amalgamation of 10 PSBs into Four bigger banks:
1). PNB with the merger of Oriental Bank of Commerce and United Bank of India will be 2nd largest PSB after SBI and will have the business size of Rs 17.94 lakh crore.
2). Canara Bank with the integration of Syndicate Bank will become 4th largest PSB having the business size of Rs 15.20 lakh crore.
3). Union Bank of India after subsumption of Andhra Bank and Corporation Bank with a business size of Rs 14.59 lakh crore will be 5th largest PSB.
4). Indian Bank to be 7th largest PSBS with business size of Rs 8.08 lakh crore after the merger of Allahabad bank.

This latest consolidation exercise is a part of measures to overhaul the economy and boost growth. As India is set to become $5 trillion economies by 2024, strong banks are essential with enhanced capacity to increase credit. The move will also increase operational efficiency and thus bring down the cost of lending. Besides Enhanced risk appetite and better technology for banking customers will be better served with more customized and wider options.

Earlier consolidation of 5 associate banks of SBI in 2017, and in April this year, Bank of Baroda, Dena Bank and Vijaya Bank’s merger unlocked many potential such as Robust CASA growth, strong retail loan growth, enhanced profitability, wider offerings with more customization. There is also no retrenchment as evident from these mergers and dispelling the notion of any shrink in the existing workforce.

Previously, she made the announcement of capital infusion of Rs 70000 in PSBs for the current fiscal. Other slew of measures which were put in place to bolster the banking space include Swift messages linked to CBS, IT-based centralized processing centers for sanctioning of loan, Specialized agencies to monitor loans greater than Rs 250 crore, sanctioning and monitoring of Big loans strictly separated, implementation of Fugitive Economic Offenders Act to confiscate assets, no interference in commercial decisions of banks, Setting up of NFRA as independent regulator of auditors and withdrawal of restructuring schemes.