India announces series of mergers of state-run banks

India announces series of mergers of state-run banks”

According to him, the proposed merger would result in closure of large number of branches as it happened in the case of State Bank of India, affect banking services and reduce employment opportunities.

As per the announcement, Punjab National Bank, Oriental Bank of Commerce and United Bank will merge together to emerge as the second largest state-run lender, while two banks with a predominant presence in the south - Canara Bank and Syndicate Bank - will evolve into a single entity, which will also be the country's third largest. The merger of Union Bank with Andhra Bank and Corporation Bank will create India's fifth-largest PSU bank.

In April 2017, he announced the merger of five associate banks and the Bharatiya Mahila Bank with the State Bank of India (SBI). But what's the plan for branches of merging banks overlapping in the same area?

He alleged the merger of public sector banks would mean closure of six banks. With Punjab National Bank (PNB) and Oriental Bank of Commerce having a common synergy area we can optimise on resource utilisation and whereas United Bank of India is rich in CASA and has a better presence in north east as well as in the eastern part of the country.

While the finance ministry refrained from commenting on the timeline by when the entire process will be completed, going by precedents, it'll take nothing less than 6-12 months. But the most important reason for creating bigger banks is addressing the bad loan issue.

Merging these banks won't make the NPAs disappear but it will be like bundling small problems into one big problem to deal with.

Besides these mergers, the finance minister also announced a slew of governance reform steps in state-run banks, the most important one being the appointment of chief risk officers with market-linked compensation.

Commenting on the merger decision, PNB Managing Director Sunil Mehta said this is a very welcome measure taken by the government. Customisation has to be done on our platform as well as Syndicate Bank platform. He recalled that when the financial recession was experienced world over in 2008, the domestic banking system was safe because of public sector banks. Also, dealing with the redundant workforce and branches will be hard, considering that bank employees' unions are strong and they have been against mergers.

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