Mega bank merger to come in effect from April 1, banking confederation urges to defer the plan

Last updated on February 9th, 2023 at 12:47 pm

On Thursday government announced that the mega bank merger plan was on track and would come into effect from April 1. Banking Secretary Debasish Panda told reporters that the banking sector would be able to overcome the challenges posed by the outbreak of coronavirus pandemic. “That is very much on the track. It’s parallel activity going on. As far as fund transfers etc are concerned, necessary arrangements will be made,” Panda said.

On being asked, if the government was considering delaying the deadline for the mergers, given the ongoing nationwide lockdown, Finance Minister Nirmala Sitaraman said, “There is no uncertainty about bank merger… I must thank all the banks because through their boards they have taken that call. There is absolutely no uncertainty.”

Last year in August, government announced consolidation of 10 public sector banks into four, to transform them into stronger, more accessible, smarter and tech-enabled institutions with greater financial capacity.

“We are also conscious of extra load on them [banks] in terms of the kind of demands that I put on them. I have asked them to reach out to 400 districts, I have asked them to reach out to MSMEs, restructure their loan. So there is a lot of core banking work, which they are undertaking. I must be conscious of that also. So the merger and the decision taken by respective banks boards are all well taken. We are going as per schedule on that. There is no uncertainty on that. I am on course. There need not be speculation,” she said after releasing EASE 3.0, the Public Sector Bank (PSB) Reforms Agenda 2020-21.

As per the plan, Oriental Bank of Commerce and United Bank of India would merge into Punjab National Bank, making it the country’s second-largest lender after SBI. Besides, Syndicate Bank would merge into Canara Bank; Andhra Bank and Corporation Bank into Union Bank of India; and Allahabad Bank into Indian Bank.

Read: FM announces 1.7 lakh crore relief fund in a bid to help poor amid corona crisis

Post the mergers, there would be seven large public sector banks (PSBs), and five smaller ones. In 2017, there were about 27 PSBs. Each of these amalgamated banks would have business of over Rs 8 lakh crore. The bank consolidation plan was undertaken to give India strong financial institutions capable of competing with global banks.

Besides the government being optimistic about executing the banking consolidation plan on time, All India Bank Officers’ Confederation (AIBOC) held a varied view. On Wednesday the confederation urged Prime Minister Narendra Modi to defer the plan in view of the national health emergency caused by the spread of Covid-19.