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A Big Move by Government of India

Mega Mergers of PSBs

Government of India (GoI) has 15.20 lakh crore. With lower gross NPA ratio of
announced the third round of 8.77%, Canara Bank will get about Rs 6,500 crore
bank merger plan to revive capital from the government. Union Bank of India
public sector banks along with will see itself taking over Andhra Bank and
flagging economy from five Corporation Bank. Post-merger it will become 5th
year low. Finance minister largest PSB. The combined business base of the
Nirmala Sitharaman recently
declared the merger plan of 10 merged bank will be Rs 14.59 lakh crore. Union
Piyush Nakrani Bank has a high Net NPA ratio of 6.85%. The
public banks into 4. As per the
finance minister, the merger would help to manage government will provide Rs 11,700 crore to Union
the capital more efficiently. The amalgamation of Bank for the merger process.
the PSBs is based on bad loans intensity and Impact of PSU Bank Mergers
regional factors.
Merits of Merger-
After the mergers, the country will have 12 public
sector banks, including State Bank of India (SBI) • A large capital base would help the acquirer banks
and Bank of Baroda (BoB). to offer a large loan amount
What’s also noteworthy is the fact that the • Service delivery can get improved
government has announced capital infusion worth
more than Rs 55,000 crores into public sector banks • Recapitalization need from the government to
(PSBs). The government is seriously considering reduce
reducing the number of public sector banks (PSUs) • Customers will have a wide array of products like
from the existing 21 to 12 with a view to creating 3- mutual funds and insurance to choose from, in
4 global sized banks.
addition to the traditional loans and deposits
Post the mega-merger, the six PSU banks that will
• Technological up-gradation on the cards and
remain independent, because they have shown a
various other products
good Advance to deposit and Low Net NPA are as
• With fewer banks, it is possible for the ministry to
follows:
better focus on the banks on its watch.
1. Indian Overseas Bank,
Demerits of Merger-
2. UCO Bank,
• It would be tough to manage issues pertaining to
3. Bank of Maharashtra,
human resource
4. Punjab and Sind Bank
• Few large inter-linked banks can expose the
5. Bank of India, and broader economy to enhanced financial risks

6. Central Bank of India. • The local identity of small banks won’t be that
On 1st April 2017, SBI and its ASSOCIATE prominent.
merger happened and It become India’s first-
largest public bank in terms of total Assets Rs.37
Trillion. After SBI, PNB will become the second-
largest public banks with almost 1.5 times higher
existing business. Last year in 2018, the
government had merged Dena Bank and Vijaya
Bank with Bank of Baroda, creating the third-
largest bank by loans in the country. Canara Bank
will take over Syndicate Bank, and it will be the
fourth-largest public sector bank of the country.
After the merger, the combined business will be Rs

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