Economy

PSU bank stocks surge in anticipation of merger announcement

PSU bank stocks surge in anticipation of merger announcement”

"The consolidation in the banking sector will create higher efficiencies through better utilization of capital, greater credit disbursal, focused customer service and global expansion opportunities", said Rashesh Shah, chairman and CEO, Edelweiss Group.

The Finance Minister further informed that specialised agencies have been set up to monitor every loan which is over Rs 250 crores.

Venkatachalam, while speaking to reporters, said that bankers will hold massive demonstrations and also wear black badges.

"For banks to grow and support the economy, they need capital. Unless capital issue is resolved, I don't think there would be much action by banks", Guha said.

The FM also announced that banks will be infused with capital to be able to cover mergers and compliance costs. The mega-merger was announced by Finance Minister Nirmala Sitharaman during a press conference on Friday.

Crisil senior director Krishnan Sitaraman said consolidation will bring in economies of scale, increase operating efficiencies and bring in business synergies. "The employees will only benefit", he said. Andhra Bank is small and Corporation Bank is more strong in south as well as in other areas.

J Packirisamy, MD & CEO of Andhra Bank said, "We are getting merged with Union Bank of India along with Corporation Bank".

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.

All of those mentioned here will be merged now with larger banks.

She said the creation of next-generation banks was imperative for India to become a U.S. $5 trillion economy in the next five years.

"The move underlines the fact that the government recognises the importance of a robust banking system in achieving the goal of Dollars 5 trillion economy as bigger banks will be better armed to meet the credit needs of a fast growing economy like ours", Kumar said.

Besides, seven other banks will be merged to form three larger Public Sector Banks (PSBs).

Punjab National Bank, Oriental Bank of Commerce and United Bank would be merged into a consolidated bank, which will become the second largest state-controlled bank in the country.

In January this year, the Union Cabinet had approved merger Dena Bank and Vijaya Bank with Bank of Baroda. The combined advances base of the merged bank will be Rs 6.61 lakh crore and the deposit base will stand at approximately Rs 8.6 lakh crore.

Sitharaman added that the gross NPAs of Public Sector Banks have come down to Rs. 7.9 trillion in March quarter of the last fiscal year, from Rs. 8.65 trillion in the previous December quarter.



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