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Experts discuss government's mega bank mergers

Updated : August 30, 2019 08:58 PM IST

Continuing its firefight against an ever-deepening economic slowdown, the government on Friday unveiled a mega plan to merge 10 public sector banks into four with a view to creating fewer and stronger global-sized lenders with robust balance sheets that can be used to boost credit and spur growth.

Union finance minister Nirmala Sitharaman, who had last week announced the first of three planned stimulus packages, made the announcement of the mergers just before official data showed that growth in Asia's third-largest economy slumped to an over six-year low of 5 per cent in the April-June quarter of 2019-20.

The mergers announced on Friday, together with two set consolidations done last year, will reduce the number of public sector banks to 12 from 27 in 2017.

At a media briefing, she said Oriental Bank of Commerce and United Bank will merge with Punjab National Bank to create the nation's second-largest lender behind State Bank of India.

Also, Syndicate Bank will merge with Canara Bank while Andhra Bank and Corporation Bank would subsume into Union Bank of India, and Allahabad Bank will be amalgamated with Indian Bank. Also, the government will infuse Rs 52,250 crore in 10 banks to boost their balance sheets.

"Banks with a strong national presence and global reach is what we want," Sitharaman said. "Scaling up will only allow them to have lot more resources and therefore the lending cost can come down."

After the merger, India will have 12 "solidly present, well-consolidated, energised, adequately capital endowed banks," she said. "We are trying to build NextGen banks."

CNBC-TV18 discusses the government's new move with VG Kannan, chief executive officer, Indian Banks' Association; Janmejaya Sinha, chairman (India), Boston Consulting Group; Srikanth Vadlamani, vice-president for financial institutions group at Moody's; MR Umarji, former chief legal advisor, Indian Banks' Association and Ananth Narayan, professor of SPJIIMR.

(With inputs from PTI)
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