The Finance Minister has announced the merger of 10 public sector banks into 4 to address the economic slowdown problem and boost the economy by increasing liquidity, diversifying the risk, and combating the issue of non-performing assets. The number of public sector banks is now reduced from 27 to 12. The Finance Minister of India also announced INR 55,000 Crore recapitalization after the merger.
Do you know what is bank merger and why it happens?
When two or more enterprises join together under any circumstances, it is said to be a Merger. Bank Merger is an agreement between the acquiring bank and the merged bank to combine their assets and liabilities and become a single entity. Bank merger is happening because they will help reduce financial problems, strengthen the balance sheets, and improve customer service. Though the bank merger in India has proved to be good for the overall economy, we need to wait and watch the progress of the banking industry post-merger.
Bank merger is something familiar in India. The first bank merger happened in 1921 with three significant banks, i.e. Bank of Bengal, Bank of Bombay, and Bank of Madras, into Imperial Bank of India, later known as State Bank of India (SBI).
The banking sector in India is one of the fundamental pillars of this country’s economy. There are multiple players in the domain, including the PSBs, or Public Sector Banks. In these financial institutions, the Government of India is the majority stakeholder, and the Government policies largely operate them.
However, in a recent move to contain the country’s banking administrative system, the government aims to reduce the number of PSBs. This move will help the banks reduce their NPAs, operate more efficiently, and reduce the government’s financial burden. Hence, the Indian Government has merged public sector banks.
Read on to learn more about this move.
From the existing 21 banks, the number has been brought down to 12. The government is trying to create 3 to 4 banks of global standard sizes.
Sl. No | Acquirer/Anchor Banks |
|
1. | Punjab National Bank(PNB) |
|
2. | Indian Bank | Allahabad Bank |
3. | Canara Bank | Syndicate Bank |
4. | Union Bank of India |
|
The depositors and the customers who hold accounts or have deposited their assets in these merging banks will be treated as the customers of the parent bank in which the banks mentioned above have been merged. For instance, if you had a savings account in Oriental Bank of Commerce before it was merged, then after merging, you will have an account in PNB.
On 1 April 2020, two prominent banks, the United Bank of India and Oriental Bank, were merged with the Punjab National Bank (PNB). Following this, PNB became the second-largest bank in India. The total business size of the financial institution is now in the range of ₹17.94 lakh crore, and it is second only to the State Bank of India, which has a business exceeding the ₹52 lakh crore range. The logo of the Punjab National Bank has also been modified to include the signage of the parent banks and the other merged banks.
The Allahabad Bank was merged with the Indian Bank in February 2021. After merging, the combined business base of the bank was ₹8.07 lakh crore, and it became the 7th largest Indian PSB. The new Indian Bank has a net NPA ratio of 3.75%. To complete the merger process, the banks received ₹2,500 crores from the Government.
As a part of this process, Canara Bank joined hands with the Syndicate Bank on 1 April 2020, and it is the fourth-largest PSB in the country. After merging, these two banks have a combined business of ₹15.20 lakh crore. That’s not all; Canara Bank will get about ₹6,500 crores in capital from the Government.
Union Bank of India took Corporation Bank and Andhra Bank under its operation on 1 April 2020. Post-merger, it became the 5th largest PSB in India with a combined business base of ₹14.59 lakh crore. The Government had provided ₹ 11,700 crores to Union Bank to process this merger.
Apart from this 8 bank merger list, the Government merged Vijaya Bank and Dena Bank with the Bank of Baroda in 2019. After that, the Bank of Baroda became the 3rd largest bank in the country in terms of the loans given out.
After the mega-merger of the banks mentioned above, six PSBs will remain independent. The list of those PSBs is given below:
As the government has merged public sector banks, it will have implications. Apart from the staff and network accumulation, there are other effects; some are advantageous, and others are disadvantageous. Let’s see what the pros and cons of the merger are.
Pros of the Merger
Cons of the Merger-
The Indian government merged public sector banks with a clear objective, a transparent and efficient system. In this process, the government has been successful as the customers are now benefiting from this move. They are receiving better service, which is always the priority for any financial institution.
If you have any further queries or feedback, do let us know in the comment section. if you like the article please share it.
Ans. Yes, there are numerous online resources available that can help you prepare for bank exams. These include practice tests, study materials, and video tutorials. Utilizing these resources can help you familiarize yourself with the exam pattern and topics, improve your speed and accuracy, and minimize negative marking.
Ans. Yes, there are numerous online resources available that can help you prepare for bank exams. These include practice tests, study materials, and video tutorials. Utilizing these resources can help you familiarize yourself with the exam pattern and topics, improve your speed and accuracy, and minimize negative marking.
Ans. Yes, there are numerous online resources available that can help you prepare for bank exams. These include practice tests, study materials, and video tutorials. Utilizing these resources can help you familiarize yourself with the exam pattern and topics, improve your speed and accuracy, and minimize negative marking.
Ans. It is generally not possible to change your answers after submitting the exam. Therefore, it is important to review your answers carefully before submitting to avoid negative marks for wrong answers.
Ans. To stay calm and focused during the exam, you can:
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