Government Announces Public Sector Banks Merger; Now Only 12 State-Run Banks Instead of 27; Here is the Complete List

Banking Merger News: Finance minister Nirmala Sitharaman today (30^th August 2019) announced the merger of Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank to form India’s second largest public sector bank with a business of Rs. 17.95 lakh crore, which is "1.5 times the size of PNB”.

Finance Minister announced three more such mergers saying that the government "wants a strong financial system" to clear the path towards making India a $5-trillion economy.

The other merger will be between Syndicate Bank and Canara Bank, which will make the 4^th largest bank, with Rs. 15.2 trillion business.

Further, Union Bank will be merged with Corporation Bank and Andhra Bank to build India’s 5^th largest public sector bank with Rs. 14.59 trillion in business.

Also Indian Bank will be merged with Allahabad Bank to form country’s 7^th largest PSB with a business of Rs. 8.08 trillion.

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Finance minister said that the earlier merger of Vijaya Bank, Bank of Baroda and Dena Bank led to increased customization & rationalization of operations without any cutback. CASA (current & savings account) growth was 6.9 percent in the June quarter; retail loan growth was 20.5 percent and the profitability was around Rs. 710 crore.

Sitharaman added that the gross NPAs of Public Sector Banks have come down to Rs. 7.9 trillion in March quarter of the last fiscal year, from Rs. 8.65 trillion in the previous December quarter. Out of total 18 public sector banks only 14 are in profit-earning situation at this time.

She said the government will front-load its Rs. 70,000-crore capital infusion into PSBs to push an additional lending of Rs. 5 trillion. In financial year 2019, the Centre had infused more than Rs. 1 trillion in public sector banks. The last tranche of Rs. 48,239 crore in February had allowed 6 lenders to leave the Reserve Bank of India’s PCA or prompt corrective action scheme. RBI uses the PCA framework to protect lenders breaching regulatory thresholds in bad loans & capital adequacy.

The Centre had earlier announced measures to help non-banking financial companies (NBFCs) & housing finance companies (HFCs). It assured additional liquidity support of Rs. 20,000 crore by National Housing Bank, taking the total to Rs. 30,000 crore to support HFCs. As part of the Rs. 1-trillion scheme that was announced for restoring liquidity in the NBFCs, the Centre will give a one-time six-month partial credit guarantee to PSBs for the first loss of up to 10 percent for the purchase of high-rated assets.

Sitharaman said after the mega PSU bank merger, there will be 12 public sector banks in the system instead of 27.