Finance Minister Nirmala Sitharaman meeting PSU bank chiefs today; to discuss big bank mergers

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Published: September 19, 2019 2:54:10 PM

Finance Minister Nirmala Sitharaman will likely discuss the strategy, timeline, and procedure to complete the merger process with the heads of PSU banks today.

 finance minister, Nirmala Sitharaman, PSU bank, public sector banks, big bank merger, slowdown, steps to revive economyWhile the government believes that the merger will reduce the burden of stressed assets on these banks, many officials think that this can lead to a large-scale payoff.

Finance Minister Nirmala Sitharaman will meet heads of India’s PSU banks today to discuss easing liquidity conditions and providing operational support, following up on her announcement to merge 10 public sector banks into four bigger and stronger lenders. Amid the ongoing slowdown, Nirmala Sitharaman will likely discuss the strategy, timeline, and procedure to complete the merger process with the heads of PSU banks today. While the government believes that the merger will reduce the burden of stressed assets on these banks, many officials think that this can lead to a large-scale layoff.

Consequently, bank officers and employee unions are agitated with this move and will hold a protest at Delhi’s Jantar Mantar on Saturday. Bank officers and clerical employees of all the affected banks will gather for the protest from across the country.

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Since the lack of investments is majorly attributed to the current slowdown, the government aims to increase investments by improving the health of the PSU banks. The announcement of the big banks merger plan includes 1) merger of Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank to form the second-largest public sector bank in the country, after the State Bank of India (SBI); 2) merger of Canara Bank and Syndicate Bank to create India’s fourth-largest PSU bank; 3) merger of Union Bank of India with Andhra Bank and Corporation Bank to build India’s fifth-largest lender, and; 4) merger of Indian Bank with Allahabad Bank to make India’s seventh-largest PSU bank.

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As a part of monetary support, the government has already recapitalised the PSU banks with Rs 70,000 crore in the last month. Indian PSU banks are reeling under the pressure with gross NPAs as high as 14% of advances. High level of stressed assets is not only hurting PSU banks’ balance sheets, the subsequent provisioning is also eating into their profitability. Despite earning the operating profits, many banks have registered net loss to provision for bad debts and stressed assets.

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