Finance Minister Nirmala Sitharaman announced a bucket of reforms that will change the way PSBs function in the country. The Indian banking system is dominated by public sector banks and these reforms are bound to have an impact on the entire industry. It may also change the way private lenders look at their peers in terms of competition.
- Canara Bank and Syndicate Bank to be merged; Union Bank, Andhra Bank
andCorporate Bank to be merged
- Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank of India to be merged; Indian Bank and Allahabad Bank to be merged
Here are the Highlights of Big Bank Mergers:
- We want banks with
strongnational presence and enhanced risk appetite
- Indian Bank to be merged with Allahabad Bank (anchor bank – Indian Bank)
- Consolidated Indian Bank and Allahabad Bank to be 7th largest public sector bank with cRs 8.08 lakh crore business ((anchor bank – Indian Bank)
- PNB, OBC and United Bank to be merged (PNB will be the anchor bank)
- Union Bank of India, Andhra Bank and Corporation Bank to be merged (anchor bank – Union Bank of India)
- Consolidated Union Bank of India, Andhra Bank and Corporation Bank to be 5th largest public sector banks with ₹14.6 lakh crore business
- Canara Bank and Syndicate Bank to be merged
- Consolidated Canara Bank and Syndicate Bank to be 4th largest public sector bank with ₹15.2 lakh crore business
Among the governance changes, the move to have a separate mechanism for sanctioning and monitoring of big loans will ring-fence the banks against potential frauds. Further, the decision to empower bank boards and operational flexibility in hiring from the market will prioritise robust risk-management practices in decision making.