The Union cabinet on Wednesday approved amalgamation of 10 public sector banks into four larger banks. The cabinet approval was for the decision already announced on August 30, 2019. This amalgamation will be effective from April 1.
According to the approved plan, Oriental Bank of Commerce and United Bank of India will merge into Punjab National Bank; Andhra Bank and Corporation Bank will merge into Union Bank of India; Syndicate Bank into Canara Bank; and Allahabad Bank into Indian Bank.
The amalgamations will create strong banks with the capacity to meet the needs of a $5 trillion economy and massively enhance the reach of banking services to the public, say officials.
For the existing customers of all the amalgamating banks, this will increase access to banking services by about 3,000 branches or more. Businesses and industry will benefit through increased lending capacity, with the regulatory ceiling for lending individual borrowers increasing by over Rs 1,500 crore to 3,000 crore, and the ability to support specialised loan products like supply chain financing and cash management services.
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This is the third instance of amalgamation, as last year the government had approved merger of Bank of Baroda, Vijaya Bank and Dena Bank, while erstwhile associate banks of State Bank of India were merged into the public sector bank in 2017.
With the amalgamation, the number of PSBs will get consolidated from 27 banks in 2017 to 12 banks.
Sources said the banks are ready to smoothly carry out the amalgamation without any disruption of services to customers. Further, the banks have adopted an approach of ‘best-across-amalgamating banks’ in terms of salary and other employee benefits, thus safeguarding the interests of all bank employees.
According to sources, the amalgamation of Vijaya Bank and Dena Bank into Bank of Baroda, has yielded considerable gains in the first year itself, with over 13 crore customers of the bank getting access to a pan India network of about 9,400 branches, 13,000 ATMs and 85,000 employees. The bank has posted strong financial performance in the first three quarters post the amalgamation, vis-a-vis the performance of the three standalone banks a year ago, with operating profit up by 11.4 per cent (Rs 1,487 crore), deposits increasing by 8.8 per cent, capital ratio increasing by 171 basis points, and retail lending growing by 15.3 per cent.