How Merging Indian PSBs By Government Is Apt For Economy Boost

Finance Minister Nirmala Sitharaman on Friday announced a mega consolidation plan for public sector banks, including Union Bank of India, Andhra Bank and Corporation Bank getting merged into a single entity

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Finance Minister Nirmala Sitharaman today made an official announcement of consolidating public sector banks which would enhance the economy at various levels and vice-versa. FM mentioned the mega consolidation plan for PSBs with Union Bank of India, Andhra Bank and Corporation Bank, PNB, Canara Bank and Syndicate Bank getting merged with each other to form a single entity.


How merging will be profitable?

  • Merging banks will transform the financial status by making it stronger economically.

  • It would augment the lending ability of the banks

  • There will be a huge margin of cost reduction due to networking overlaps, which will result in the influx of more capital

  • Merging would lead to similar culture to be followed by banks to enable smooth consolidation and cost savings

  • The step would lead to more income opportunities for subsidiaries and joint ventures. This would act as an economic boost for the banks as well as various subsidiaries.

  • Also, keeping fraudsters in consideration, FM said that the SWIFT messaging system has now been linked with the core banking system to avoid frauds.

Increase in the consolidated bank capital

Finance Minister Nirmala Sitharaman announced the merger of two banks - Canara Bank and Syndicate Bank - both of which operate predominantly in the South. These two banks will be consolidated to form the fourth largest public-sector bank with business of Rs 15.2 lakh crore. Canara Bank has Rs 10.4 lakh crore and Syndicate Bank has Rs 4.7 lakh crore in business. These banks together will have the third largest branch network in India with 10,342 branches across the country.

The Finance Minister also announced the merging Punjab National Bank, Oriental Bank and United Bank. This would lead to Rupees 18 Lakh crore combined business capital and this would become second largest network in India.

Ministry decided to merge Union Bank of India, Andhra and Corporation Bank in a combined state. Sitharaman said that the merger of these state-owned banks would make it the fifth largest bank of the country with business of Rs 14.59 lakh crore, which is nearly two times of Union Bank of India.

With today's merger of public sector banks (PSBs), the total of number of state-owned banks in the country would come down to 12 from 27 in 2017. The steps towards the better economic growth are increasing and government seems to have more announcements in the coming future.