Big Bank Theory: India To Have Only 12 PSBs As 10 Govt Banks To Merge Into Four

Union Finance Minister Nirmala Sitharaman on Friday announced the biggest consolidation exercise in the banking space with four major mergers of public sector banks (PSBs). The move will see ten public sector banks merge into four larger entities. These mergers will bring down the total number to 12 public sector banks from 27 in 2017, a move aimed at making state-owned lenders global sized banks.

Punjab National Bank, Oriental Bank of Commerce and United Bank of India will merge to become the second largest public sector bank in India. Sitharaman also announced the mergers of Canara with Syndicate Bank to create the largest public sector bank and merger of Andhra Bank with Union Bank and Corporation Bank as India's fifth largest publics sector bank. Indian Bank and Allahabad Bank will merge to become the seventh largest public sector bank. 

In place of fragmented lending capacity with 27 PSBs in 2017, now there will be only 12 state-run banks post consolidation, Sitharaman said. The finance minister also said banks will be provided adequate capital.

Last week, she had announced that the Rs 70,000 crore capital infusion for PSBs for the current fiscal would be front-loaded.

Financial Services Secretary Rajiv Kumar, who was also present at the press conference, said there was no retrenchment in the past consolidations, including of SBI, and service conditions of employees improved.

"Employees will only benefit with the mergers," he added.

Earlier this year, 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 the State Bank of India.

Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab and Sind Bank will continue to function as earlier as they have strong "regional focus", Sitharaman added.

Post the consolidation announced on Friday, Punjab National Bank will have business size of Rs 17.94 lakh crore, becoming the second largest PSB after SBI with a business of Rs 52.05 lakh crore.

The consolidated Canara Bank will be the fourth largest bank with business of Rs 15.2 lakh crore, followed by Union Bank of India at Rs 14.59 lakh crore.

After subsuming Allahabad Bank, Indian Bank will be the seventh largest state-lender with business size of Rs 8.08 lakh crore.

Bank of Baroda, after the merger with Vijaya Bank and Dena Bank, had become the country's third largest bank. It has a business of Rs 16.13 lakh crore. 

(With PTI Inputs)

HIGHLIGHTS

• There will be only 12 state-run banks in India post consolidation.
• PNB, OBC and United Bank will merge to crate the the second PSB in India.
• The finance minister also said banks will be provided adequate capital.