Dus Ka Char: Government To Merge 10 PSU Banks Into Four

In order to create large-size state-owned banks, the government has decided to merge 10 public sector banks into four.

The mergers will help drive credit growth, lift the slowing economy of the country and boost the government's target of a $5-trillion economy by 2024. After the merger, India will have 12 public sector banks from 27 in 2017. The mergers are expected to enhance risk appetite, create stronger balance sheets and rationalise branches as many state-owned banks were sub-par in size. Supplementing the merger decision is the government's move to infuse capital into many state-owned banks, which will boost lending.

Punjab National Bank, Oriental Bank of Commerce and United Bank of India will be merged to form one bank which will become the country's second-largest lender after State Bank of India, with a total business of close to Rs 18 lakh crore and 11,437 branches. The second merger will be Canara Bank and Syndicate, which will create the fourth largest state-owned bank with Rs 15.2-lakh crore business and branch network of 10,324 branches. The third will be merger of Union Bank of India with Andhra Bank and Corporation Bank, which will create the fifth-largest public-sector bank with Rs 14.59-lakh crore business and 9,000 branches. The fourth merger will be Indian Bank with Allahabad Bank, which will make it the seventh-largest state-owned bank in the country with Rs 8-lakh crore business. After the merger, the boards can appoint chief risk officer at market-linked compensation and the risk management committee will be empowered to veto management decisions.