Top Bankers Welcome Govt Move to Merge Several Public Sector Banks

Objective of the mergers is to make them global sized banks, Finance Minister Nirmala Sitharaman said.

In a major development, Finance Minister Nirmala Sitharaman on Friday, 30 August, announced merger of Oriental Bank of Commerce and United Bank with the Punjab National Bank. Also, Indian Bank will be merged with Allahabad Bank, making it the seventh largest state-owned bank.

Objective of the mergers is to make them global sized banks, Sitharaman said.

Reacting to the Centre’s announcement, PNB Managing Director and CEO Sunil Mehta said this particular merger (of Oriental Bank of Commerce and United Bank with the Punjab National Bank) is going to be beneficial for the entire banking system and for the country as a whole.

The merger of three banks will bring a lot of synergies into the existing entities, Mehta said.

Asserting that the capital infusion announced by the government for the merged entity is enough, Mehta told BloombergQuint:

“All the requirements of the bank, including the minimum regulatory requirement as well as the growth requirements have been completed while working out the Capital infusion.”

Sunil Mehta, PNB Managing Director and CEO 

Sitharaman also announced that Syndicate Bank will be merged with Canara Bank, while Andhra Bank and Corporation Bank will merged with Union Bank of India.

Reacting to the development, Canara Bank MD and CEO RA Sankara Narayanan said the move will provide better opportunities to do quality business.

Narayanan told BloombergQuint:

“Since both the banks (Canara bank and Syndicate bank) are based in Karnataka, there won’t be any cultural differences at all. We will be the fourth-largest public sector bank. Plus, the government is also giving us Capital, which in turn, will provide us better opportunities to do quality business.”

RA Sankara Narayanan, Canara Bank MD and CEO 

Responding to a question on the timeline for merger of the two banks, Narayanan said “we will be taking the proposal to the board in the next 7-10 days, and once we get the approvals from the government and the gazette notifications, the actual integration may happen sometime in first week of April."

In January this year, the Union Cabinet had approved merger Dena Bank and Vijaya Bank with Bank of Baroda. The merger came in to effect from 1 April.

With these mergers, the number of PSBs will come down to 12 from 27 in 2017.

Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with State Bank of India.

These were State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad and also Bharatiya Mahila Bank effective April 2017.

(With inputs from BloombergQuint and PTI)