Sunday, 22 September, 2019

India announces mergers of state-run banks to shore up slowing economy

Government announces merger of 10 PSBs into four entities India's economic growth slows to 5%, Economy News & Top Stories
Russell Knight | 03 September, 2019, 22:25

After this amalgamation, only 12 public sector banks will be left in the country from the 27 earlier.

Business may also be disrupted by strikes threatened by the banks' employee unions, who fear that the consolidation will result in fewer branches and job opportunities.

In the biggest consolidation exercise in the banking sector, the government on Friday announced the merger of 10 banks to create four global-sized banks. "As per the announcement, Indian Bank will be merged with Allahabad Bank; Punjab National Bank, Oriental Bank of Commerce and United Bank of India to be merged; Union Bank of India, Andhra Bank, and Corporation Bank are to be merged and lastly Canara Bank and Syndicate Bank are also to be amalgamated as one".

The UFBU and AIBEA bank unions which include most of the banking staff in India will held demonstrations across India to protest against the bank mergers. The Minister announced the merger of 10 PSBs into 4 larger banks.

The general secretary said that many employees and customers had emotional attachment with the bank and they were also culturally attached with it.

It is again to be put forth to tread the path of rationalization and help spur the ailing PSBs, on Friday, Nirmala Sitharaman announced big bang merger in PSBs, wherein after the merger is effected we will have just 12 public sector banks instead of 27 now. The Syndicate-Canara merger will create the fourth largest PSB, with a Rs 15.20 lakh crore business and 10,324 branches.

Six banks have been left untouched. Similarly, the Indian Overseas Bank, UCO Bank, Bank of Maharashtra, and Punjab and Sind Bank will continue their regional focus.

Sitharaman however said that Central Bank of India and Bank of India will remain autonomous
Sitharaman however said that Central Bank of India and Bank of India will remain autonomous

The merger would lead to many service condition issues. "Twelve solidly present, well-consolidated, energised, adequately capital endowed banks will now operate". The State Bank of India has also revised its interest rates in August. "In our view, the announced capital infusion is unlikely to be sufficient for taking these banks out of PCA in immediate future".

The Indian government has chose to merge 10 state-owned banks into four, a move that has been cheered by many market participants.

Commenting on the merger decision, PNB managing director Sunil Mehta said this is a very welcome move done by the government.

The Finance Minister also unveiled governance reforms in PSBs, saying their boards will be given autonomy and empowered for succession planning. "The decision will be discussed by the board", he said.

The move will bring down the number of state-run banks to 12 from 19 after the merger of Dena Bank and Vijaya Bank with Bank of Baroda effective April 2019.

Having already this year lost to China its status as the fastest-growing major economy, the latest growth figure for India's first fiscal quarter fell well short of market expectations of 5.7 percent.

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