Govt likely to notify merger of 10 PSU banks this week; all lenders to complete amalgamation procedures by April

The government is expected to notify the merger of 10 public sector banks that it had announced last year to create four big banks this week and the merger process may be completed by April, said a news report. After the notification process is over, the boards of the banks will give their customary final approval and fix the all-important swap ratio for the mergers, said a report in The Economic Times. The banks will need to follow regulatory formalities to protect the interest of minority shareholders. Each bank is required to follow the regulatory norms to protect the interests of minority stakeholders, the report said. [caption id=“attachment_4418189” align=“alignleft” width=“380”] Representational image. Reuters.[/caption] All 10 public sector banks (PSBs) will complete the merger process by April. In December last year, RBI had opined that the country could create some global banking majors if the ongoing mergers of state-owned banks achieve desired impacts of creating stronger and well-capitalised lenders of global scale, reported PTI. Currently, there is not a single domestic lender in the global top 50 list, which since the 2008 global financial meltdown has been dominated disproportionately by Chinese lenders. “The merger of PSBs is likely to transform the face of our banking sector with the emergence of stronger, well-capitalised banks aided by cutting-edge technology and state-of-the-art payment systems. Our banks have the potential to become global baking leaders,” the Reserve Bank of India said in its annual report on ’trends & progress of banking 2018-19.’ Soon after the merger of its five associates, the SBI had a short stint in the global 50 list with a balance-sheet of around $450 billion, but soon slipped following the massive pile of bad loans in the system, which shrank its balance-sheet. Govt announces merger of 10 PSBs In August last year, the government had announced the merger of 10 PSBs into four entities, bringing down their total number to 12 from 27 in 2017, a move aimed at making state-owned lenders to global-sized banks. Finance Minister Nirmala Sitharaman had said that the banks would be provided adequate capital. Accordingly, Canara Bank will be merged with Syndicate Bank to create the fourth largest PSB with Rs 15.20 lakh crore business. Union Bank, Andhra Bank, Corporation Bank will be merged to become India’s fifth largest public sector bank with Rs 14.59 lakh cr business. Indian Bank and Allahabad Bank will merge to create 7th largest public sector bank with Rs 8.08 lakh cr business. Orient Bank of Commerce and United Bank of India will be merged with Punjab National Bank. Bank of India, Central The Indian Bank will be merged with Allahabad Bank. Oriental Bank and United Bank will be merged with Punjab National Bank thus becoming the second-largest bank after the merger. Capital infusion into PSU banks Sitharaman had also announced tentative amounts of capital infusion in 10 public sector banks. PNB will get approximately Rs 16,000 crore. Union Bank of India will get Rs 11,700 crore, followed by Bank of Baroda Rs 7,000 cr; Canara Bank Rs 6,500 crore, Indian Bank Rs 2,500 crore. While Indian Overseas Bank will get Rs 3,800 crore, Central Bank of India will get Rs 3,300 crore and UCO Bank Rs 2,100 crore. United Bank of India will get approximately Rs 1,600 crore and Punjab and Sind Bank Rs 750 crore. Together these banks will get approximately Rs 55,250 crore. — With PTI inputs