Nirmala Sitharaman announces mega bank merger: 5 key takeaways
FM Nirmala Sitharaman today announced a big banking reform initiative of the PM Narendar Modi led NDA government in which 10 public sector banks (PSBs) would be merged into four entities.
FM Nirmala Sitharaman today announced a big banking reform initiative of the PM Narendar Modi led NDA government in which 10 public sector banks (PSBs) would be merged into four entities. This includes the amalgamation of Oriental Bank of Commerce and United Bank of India with Punjab National Bank - PNB will be anchor bank. Making the announcement about the major reform measure, Finance Minister Nirmala Sitharaman said that Canara Bank and Syndicate Bank will be merged into one entity, while Union Bank of India, Andhra Bank and Corporation Bank will be amalgamated into a single entity too. Nearly 88 per cent of all PSB business will be with these consolidated banks.
Similarly, Indian Bank and Allahabad Bank will become one. Finance Minister however, said that the Bank of India and Central Bank of India would remain independent. Notably, after the amalgamation of these banks, only 12 PSBs will be left in India from the 27 earlier in 2012.
The key takeaways of today's mega PSB merger are given below:
1. With the merger, Punjab National Bank will become the second largest PSB in India with a total business of Rs 17.5 lakh crore. Punjab National Bank, Oriental Bank of Commerce and United Bank will form the second largest public sector bank with business of Rs 17.95 Lakh Crore.
2. Canara Bank will merge with Syndicate Bank to become the fourth largest Public Sector Bank with business of Rs 15.20 lakh crores. Union Bank of India, Andhra Bank and Corporation Bank after merger will become the fifth largest public sector bank now. Indian Bank will merge with Allahabad Bank to become the seventh largest Public Sector Bank with business of Rs 8.08 lakh crores.
3. According to the Finance Minister, the government will continue with 2 banks which will have national presence - Bank of India with Rs 9.3 Lakh Crores of business size and Central Bank with Rs 4.68 Lakh Crores of business size.
4. Nirmala Sitharaman said that Gross Non Performing Assets have come down from 8.65 lakh crores to 7.90 lakh crores.Gross Non Performing Assets have come down from 8.65 lakh crores to 7.90 lakh crores. Specialised agencies have been set up who are monitoring every loan which is over Rs 250 crores, Finance Minister added. Of the total 18 PSBs, 6 showed profitability in Q4FY19. Now 14 are profitable in Q1FY19.
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5. All PSU banks will now have a non-executive chairman. Significantly, this post was earlier found only in State Bank of India (SBI). SBI is India's biggest bank. These merged banks will have to appoint a Chief Risk Officer (CRO), who will be provided market-level compensation. To ensure continuity, longer terms will be given to directors on management committees.
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