The government on Friday announced the mega-merger of 10 PSU banks into four, where the Punjab National Bank, the Oriental Bank of Commerce and the United Bank to merge become the second-largest PSB while the Canara Bank and the Syndicate Bank will amalgamate to make the fourth-largest PSU bank entity.
Also in the series of mergers announced by Finance Minister Nirmala Sitharaman at a briefing here, the Union Bank, the Corporation Bank, and the Andhra Bank will be merged to become the fifth-largest PSU bank and the Indian Bank and the Allahabad Bank merge to be the seventh-largest.
Post consolidation, the number of PSU banks will come down from 27 to 12 and this, according to Sitharaman, was “the right number of PSU banks to have”.
“The mergers would help in better management of capital,” she said, while announcing the merger proposal as a part of a package of reforms for the economy.
She also announced a series of governance reforms for government banks in the hope that the capital infused by the government into the lenders would result in “stronger banks”.
In deciding on the combinations for final mergers, the government has picked some of the larger and relatively stronger banks to be the “acquirer banks”.
The combined entities will control 82 per cent of all public sector banks and 56 per cent of all commercial bank businesses.
The Punjab National Bank will see itself take over the Oriental Bank of Commerce and the Kolkata-based United Bank of India. This will form India’s second largest public sector bank, after the State Bank of India, with Rs 18 lakh crore business and the second-largest branch network.
The combined business of all three banks is 1.5 times higher than the PNB’s existing business, said Sitharaman.
The merger comes at a time when the PNB is just about recovering from the near $2 billion Nirav Modi fraud and has a high level of non-performing assets. Its gross NPA ratio stood at 16.5 percent as of June 2019. The bank reported a capital adequacy ratio of 9.77 percent at the end of the first quarter.
