12 State-Run Banks Instead Of 27 In Government's Mega Mergers: 10 Things To Know

Merger of banks: After the mega PSU bank consolidation, there will be 12 public sector banks in the system instead of 27.

Bank merger India: The government said it wants a strong financial system to achieve $5 trillion mark.

State-run banks will be merged to form a dozen strong lenders, Finance Minister Nirmala Sitharaman announced on Friday. The Punjab National Bank, Oriental Bank of Commerce and United Bank will merge to form the country's second largest public sector bank with a business of Rs. 17.95 lakh crore, "1.5 times the size of Punjab National Bank". Three more such mergers were announced as the Finance Minister said the government "wants a strong financial system" to clear the path towards making India a $5-trillion economy.

Here are 10 things to know about bank mergers:

  1. The Canara Bank will join Syndicate Bank; Union Bank of India, Andhra Bank and Corporation Bank will merge, and Indian Bank will merge with Allahabad Bank. Together, they will hold business worth Rs 55.8 lakh crore.

  2. After the mega PSU bank consolidation, there will be 12 public sector banks in the system instead of 27, the Finance Minister said.

  3. Announcing steps to empower the public sector banks, the Finance Minister said a board committee of nationalised banks will appraise the performance of general managers and higher positions.

  4. For the first time, Chief Risk Offers will be recruited at market-linked compensation to attract best available talent.

  5. The government further said PSU banks will be repositioned to take the economy to the $5-trillion mark, with wide ranging reforms, financially stronger and well-provisioned lenders, technology-driven banking, synergy and stronger governance.

  6. The Finance Minister also said that loan recoveries have hit a recovery level of Rs. 1,21,076 crore. Gross non-performing assets (NPAs) - or bad loans - have come down from Rs. 8.65 lakh crore to Rs. 7.90 lakh crore, she added.

  7. Analysts said the steps announced by the government are in the right direction. "This is a much awaited and a step in the right direction in order to consolidate the size of the banks and improve the efficiency. The move can also help expand the size of the economy," Deven Choksey of wealth management company KR Choksey Investment Managers told NDTV.

  8. The announcements on bank consolidation comes a day after the Reserve Bank of India (RBI) said in its annual report that frauds in the banking system increased 74 per cent to Rs.71,543 crore in financial year 2018-19.

  9. The RBI also said that the average lag between the date of occurrence of frauds and its detection by banks stood at 22 months.

  10. In its bid to push investments and revive growth, the government has announced a range of measures in the past few days, including easing of FDI or foreign direct investment norms in four sectors, and a reversal of higher taxes on foreign investors as announced in Budget.



Highlights

  • PNB to be country's second largest public sector bank after merger
  • Consolidation plan to result in 12 PSU banks in system, instead of 27
  • Government wants a strong financial system, says Finance Minister
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