Govt Plans to Begin Next Round of PSB Mergers Soon, Aims To Have 4-5 Big Banks: Report

 

With an aim to have 4-5 banks as big as State Bank of India (SBI), the government is planning to initiate the next round of state-run banks’ mergers after a detailed study on the outcome of amalgamation in public sector banks (PSBs), according to an ET report. Currently, there are seven large PSBs and five smaller ones in India.

“Concerned banks have been asked to submit their feedback by month end. We will be holding wider consultations through Indian Banks’ Association (IBA) and with other stakeholders before firming up the future strategy,” the report said quoting an official.

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The Centre had in 2019 announced a merger of 10 PSBs into four large lenders, bringing down the number of government-run banks to 12 as compared with 27 in 2017. The merger had come into effect starting April 2020.

United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank; Syndicate Bank was merged with Canara Bank; Allahabad Bank was amalgamated with Indian Bank; and Andhra Bank and Corporation Bank were consolidated with Union Bank of India.

In 2019, 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 India’s largest lender SBI.

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“Government, after consulting RBI, approved that respective Board of Public Sector Banks (PSBs) may consider amalgamation. Bank Boards concerned considered the amalgamation and approved the same in-principle. The government, after considering inputs of RBI and in-principle approval and inputs of banks, amalgamated Vijaya Bank and Dena Bank into Bank of Baroda w.e.f. 1.4.2019 and Oriental Bank of Commerce and United Bank of India into Punjab National Bank, Andhra Bank and Corporation Bank into Union Bank of India, Syndicate Bank into Canara Bank, and Allahabad Bank into Indian Bank, w.e.f. 1.4.2020,” the MoS Finance had stated last year in a written reply to the Lok Sabha.

Apart from merger, the privatisation of PSBs is also on the cards. While the government proposed privatisation of two PSBs in the last Budget, some feel that the process could be initiated only after more consultations among stakeholders, including potential investors.

The Niti Aayog has already recommended the privatisation of Indian Overseas Bank (IOB) and Central Bank of India (CBI). However, the government has not yet taken a final call on this.

The finance ministry is also in discussions with the Reserve Bank of India (RBI), the banking sector regulator, on ownership and controlling stakes issues relating to privatisation. Promoters can currently hold a maximum 26 per cent stake in private banks, according to another ET report.

The government had listed the Banking Laws Amendment Bill, 2021, in the winter session of Parliament but it wasn’t introduced. The Bill had proposed “amendments in Banking Companies (Acquisition and Transfer of Undertakings) Acts, 1970 and 1980 and incidental amendments to Banking Regulation Act, 1949”.

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