The Union Finance Minister of India Nirmala Sithamraman had announced the merger of ten public sector banks (PSBs) into four major PSBs in 2019. And as per the recent press released by the Press Information Bureau, Government Of India, this merger will be effective from 1st April, 2020. After the merger, the total number of public sector banks in India will come down to 12.
Merger of 10 banks into 4:
Ten PSBs will be merged into four PSBs thus bringing the total number of PSBs in India to 12. Let’s take a look which banks will be merging with which bank to form the single entity.
Some Important Points from the Press Release
- The amalgamation of banks will be effective from the new financial year starting from 1st April, 2020.
- Oriental Bank of Commerce will be amalgamated along with Union Bank Of India into Punjab National Bank.
- Syndicate Bank will be amalgamated into Canara Bank.
- Allahbad Bank will be amalgamated into Indian Bank
- Andhra Bank along with Corporation Bank will be amalgamated into Union Bank of India.
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What is the need of Bank merger?
The banks are considered as the backbone of the economy of any nation. According to a study given in the McKinsey Report, the asset quality is declining with the rising capital cost of the banks in the Asia- Pacific region. And India is one of the largest economy of the Asia-pacific region. India’s bank are suffering from huge loss due to the increase in the number of Non Performing Asset. Prolonged shadow of banking crises and hurdles in bankruptcy rules are some other reasons for the current declining situation of the Indian Banks.
Benefits of Bank Merger
As per the official Press release, the merger will create seven large PSBs with scale and national reach with each amalgamated entity having a business of over eight lakh crore. These amalgamation would help to create global level Banks which will be capable enough to compete globally and in India as well.
Greater Scale through amalgamation would lead to cost benefits through which banks can enhance their competitiveness and can exhibit positive impact on the Indian Banking System.
Consolidation would help the amalgamated banks to support larger ticket size Lending and to have better Operations by virtue of increased financial capacity. The amalgamated banks would adopt to best practices which will enable the banks to improve their cost efficiency and risk management, and also boost the goal of financial inclusion through wider reach.
With the adoption of the new technology, access to a wider talent pool and a larger database, PSBs would be able to gain competitive gains by leveraging in a rapidly digitalizing banking landscape.
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