Mega Merger Plan for Public Sector Banks in Simple Charts

11-September-2019 by Virtue Ventures

Here are the list of 10 public sector banks, which merged into four as announced by FM Nirmala Sitharaman

Anchor bank

 

Core Banking
 System

Business size
 (Rs. lakh cr)

PSB rank
by size

Amalgamating bank (s)

PNB

Oriental Bank of Commerce

Finacle

17.94

2nd largest

United Bank of India

Canara Bank

Syndicate Bank

iFlex

15.2

4th largest

Union Bank of India

Andhra Bank

Finacle

14.59

5th largest

Corporation Bank

Indian Bank

Allahabad Bank

BaNCS

8.08

7th largest

 

After this announcement, only 12 public sector banks remain in India. Before this, in the Year 2017, there were 27 public sector banks.

v  3 Tier System to be introduced in the Indian banking sector

ü  The first tier constitutes of at least 3-4 Banks of the Size of SBI.

ü  Tier 2 will constitute of some region- centric Bank like Punjab & Sind Bank (BSE 2.55%) and Andhra Bank (BSE 0.88%) Which Continue as independent Entity.

ü  At the same time, 3 Tier Will have some Mid- size lenders.

v  Understanding bank merger in the Indian economy

The merging of banking is considered as a step towards development in the banking sector. Such merger gives opportunities like rising fresh capital, changing the hiring policy etc. to the government. however, for those of your preparing banking jobs along with Govt. exam. The implications appear in form of vacancies, career prospects, salary, location etc.

v   Merger of Bank- PSB

If a consolidation of banks takes place than bank will have higher assets strength & increase in the capital base. also, the problems of non-performing assets (NPA) & others problems like capital requirement which are faced by the banks can be resolved to some extent.

v Advantages of merger with smaller banks

·         Large banks would have a wider capital base & can offer a larger amount.

·         Public sector bank will improve their efficiency and service delivery.

·         The burden on the central government to recapitalize the public-sector banks, again and again will come down.

·         Customers of smaller bank will get access to wider financial instrument like mutual fund and insurance products, available only with big banks.

·         Moreover, the volume of the inter-bank transactions will come down, resulting in saving of considerable time in the clearing and reconciliation of accounting.

·         From the technology perspective, a larger bank may allow to up-gradation of more technology platform.

v Disadvantages of merger with smaller banks

ü  Smaller banks will lose their local characteristics.

ü  There will be some greater financial risks to the broader economy because of a few large interlinked banks.

ü  Human resource issues will be difficult to manage.

ü  Career growth of senior management and others workers could attract problems.

ü  It may also create distress within the bank employee.

ü  It will weaken the PSB’s & encourage private sector banking. 

v New picture of PSU banks

ü  Then after the Oriental bank of commerce and United bank are merged into the Punjab national bank, it will become India's second largest bank. (SBI remains India's largest bank). Once these three banks are merged it will create a bank with a business of Rs 17.95 lakh crore and have 11,437 branches.

ü  Once the Syndicate bank is merged into the Canara bank, the resultant bank will become India's fourth largest public sector bank with Rs 15.20 lakh crore businesses.

ü  Union Bank, Andhra Bank, Corporation Bank to merge to become India's fifth largest public sector bank with Rs 14.59 lakh crore businesses.

ü  The 12 public sector banks that India will have after today's decision are: State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, Central Bank of India, Canara Bank, Union Bank of India, Indian Overseas Bank, Punjab and Sind Bank, Indian Bank, UCO Bank and Bank of Maharashtra. 

 










Sources

https://economictimes.indiatimes.com/news/economy/policy/big-bank-mergers-government-turns-ten-psbs-into-four/articleshow/70918585.cms

https://testbook.com/blog/pnb-and-bank-of-baroda/#Public-Sector-Banks-Merger-2019

https://www.firstpost.com/business/mega-bank-merger-announcement-govt-to-amalgamate-10-public-sector-banks-into-four-large-entities-7254511.html