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).