Sitharaman announces mega merger of PSBs bringing down their number to 12

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New Delhi : The Government of India, in the biggest consolidation exercise in the banking sector, announced four major mergers of Public Sector Banks (PSBs), bringing down their total number to 12 from 27 in 2017. The step is aimed at making state-owned lenders global sized banks. An announcement to this eefect was made by Union Finance Minister Nirmala Sitharaman on August 30, 2019.

Sitharaman said that United Bank of India and Oriental Bank of Commerce will be merged with Punjab National Bank, making the proposed entity the second largest public sector bank (PSB). She said that Syndicate Bank will be merged with Canara Bank, while Allahabad Bank will be amalgamated with Indian Bank while Andhra Bank and Corporation Bank will be consolidated with Union Bank of India.

The Finance Minister said that in place of fragmented lending capacity with 27 PSBs in 2017, now there will be only 12 state-run banks post consolidation. She also said banks will be provided adequate capital.She had announced last week that the Rs 70,000 crore capital infusion for PSBs for the current fiscal would be front-loaded.

Earlier this year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with the State Bank of India.

Indian Overseas Bank, UCO Bank, Bank of Maharashtra, and Punjab and Sind Bank will continue to function as earlier as they have strong regional focus, Sitharaman added.

Post the consolidation, Punjab National Bank will have a business size of Rs 17.95 lakh crore, becoming the second largest PSB after SBI with a business of Rs 52.05 lakh crore. The PNB will now 11,437 branches.

Financial Services Secretary Rajiv Kumar, said there was no retrenchment in the past consolidations, including of SBI, and service conditions of employees improved.” The employees will only benefit with the mergers,” Kumar added.

To make management accountable to Board, Board committee of nationalised banks will appraise performance of GM & above (including MD). To make span of control manageable in large PSBs, post consolidation, Boards given flexibilty to introduce CGM level as per business needs. To ensure sufficient tenure, Boards given flexibility to prescribe residual service of two years for appointment of GM and above. Executive Directors’ strength in larger banks raised to 4, for better functional focus and thrust to technology, according to a PIB release.