Finance Minister Nirmala Sitharaman to review bank merger preparedness
As the bank merger becomes effective April 1, Finance Minister Nirmala Sitharaman is scheduled to meet the chief executives of the amalgamating banks on Thursday to review the preparedness for the merger. The Union cabinet already approved consolidation of 10 public sector banks into four, earlier in the month.
The meeting would deal also on readiness of anchor banks to minimise disruption to customers and ensuring credit flow to productive sectors of the economy.
Sitharaman is likely to check the readiness and capacities of the amalgamating banks to handle and address customer queries and difficulties. The banks may also be asked to set up a common call centre with regional language support, so that customer issues are addressed and responded at the earliest.
In one of the biggest consolidation exercise in the banking industry, the government last year announced amalgamation of the Oriental Bank of Commerce and the United Bank of India with the Punjab National Bank, of the Syndicate Bank into the Canara Bank, of the Andhra Bank and the Corporation Bank into the Union Bank of India, and of the Allahabad Bank into the Indian Bank.
The amalgamation would result in creation of seven large PSBs with scale and national reach with each amalgamated entity having a business of over Rs 8 lakh crore. The mega consolidation would help create banks with scale comparable to global banks and capable of competing effectively in India and globally.
The Punjab National Bank would be the second largest public sector bank after the amalgation of Oriental Bank of Commerce and the United Bank of India with it, with over 10,900 branches. It would have a business of Rs 17.91 crore and have a CRAR of 14.46 per cent.
The amalgamation of Canara Bank and Syndicate Bank would form the fourth largest PSB with over 10,300 branches and business of Rs 15.64 crore and CRAR of 13.90 per cent.
The merger of Union Bank, Andhra Bank and Corporation Bank would form the fifth largest PSB in the country with 9,593 branches and a business of Rs 15.08 crore.
The banks would also present their business and financial plans to the minister, including credit and deposits growth and year-wise synergy realisation plan, which they have already submitted to the Department of Financial Services in the Finance Ministry.
Greater scale and synergy through consolidation would lead to cost benefits which should enable the PSBs enhance their competitiveness and positively impact the Indian banking system, as per the government.
Further, consolidation would also provide impetus to amalgamated entities by increasing their ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity.
The adoption of best practices across amalgamating entities would enable the banks improve their cost efficiency and risk management, and also boost the goal of financial inclusion through wider reach.