Finance minister Nirmala Sitharaman announcing the merger of 10 PSU banks on Friday said that consolidation is being done to achieve their national presence and global reach.
The government’s decision to merge 10 public sector banks into four large banking entities — the biggest consolidation move in the public sector banking segment to “achieve national presence and global reach” is part of the cleaning of the financial ecosystem even as the government’s sustained efforts helped get rid of the loose corporate governance, according to Finance Secretary Rajeev Kumar. Whether it is PSBs, private banks, rating agencies, debtors, auditors, there was a system which required everyone to be responsible. The entire ecosystem is getting cleaned and it will get cleaned, said Kumar in an interview to CNBC-TV18 adding that earlier everyone could get away by a Chalta Hai attitude but it is now stopped.
Finance minister Nirmala Sitharaman announcing the merger of the banks on Friday said that consolidation is being done to achieve national presence and global reach. The decision came days after a slew of reforms were announced including a Rs 70,000 crore capital infusion in the PSU sector. Earlier this year, Dena Bank and Vijaya Bank were merged with Bank of Baroda.
The finance secretary ensured that there will be the least disruption in the functioning of the banks and that the entire process will be smooth even as a conference of all the banks involved in the merger is fixed for September 5 so that they “learn from the case of Bank of Baroda, Dena Bank and Vijaya Bank merger,” he said.
The government has taken the decision to merge only those banks that have the same technology platform so that there is the least disruption, Kumar said adding that the merger date will be fixed after consultations with bank boards. The merger is likely to be completed within 12 months post the effective date. Nirmala Sitharaman had said that the merger is to make these banks competitive and financially strong players while according to RBI larger banks are labour cost-efficient in comparison to smaller banks as the former can reap the benefits of economies of scale.
The government had announced Punjab National Bank, Oriental Bank of Commerce and United Bank would be merged to create India’s second-largest lender followed by the amalgamation of Canara Bank and Syndicate Bank. Union Bank of India will acquire Andhra Bank and Corporation Bank while Indian Bank will merge with Allahabad Bank.