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Cabinet fast tracks merger of PSU banks

Govt promises no job losses; mergers by share swaps, no cash deals

Arup Roychoudhury & Indivjal Dhasmana  |  New Delhi 

PSU, banks, merger

The on Wednesday approved a framework to speed up mergers of public sector banks, the first of which could take place by March.

The mergers will not involve any cash but only share swaps. The government also said there would be no job losses after any of the mergers. PSU bank unions had gone on a strike on Tuesday.  

The decision lifted banking stocks, but bankers said the decision should not be forced on them. Minister made it clear the process would be initiated by the boards of the An official said a number of were discussing merger possibilities among themselves.

“The government is saying it will not force (mergers). They will leave it to the If the players find it reasonable and profitable, they will work on it," said Chairperson Arundhati Bhattacharya.

Business Standard had reported in June that Bank of Baroda and Canara Bank could acquire smaller like Dena Bank, Vijaya Bank, UCO Bank, Union Bank of India and

“You have a large number of in the public sector. The object is to create strong Our experience of consolidation has been positive so far,” Jaitley said at a media briefing after the meeting. He added the decision to merge would be “solely based on commercial considerations”.

The official said once had decided to merge and had worked out issues like share valuation and swap ratio, the exchanges would be notified. Simultaneously, the of India and the government would study and approve the proposal, the person said. The final approval will be given by the

The alternative mechanism, similar to structures put in place to approve disinvestment proposals, would be decided by Prime Minister and overseen by Jaitley, sources said.

After approval in principle from the RBI and the government, the would take steps to merge in accordance with the law and the requirements of the Securities and the Exchange Board of India, an official statement said. 

“The final scheme (of each merger) will be notified by the central government in consultation with the RBI,” it added.

The mergers will take place under the Banking Companies (Acquisition and Transfer of Undertakings) Act. The official said the law allowed mergers. Bids for financial and legal advisers will be issued by the A strategy to revive public sector has pegged their recapitalisation by the government at Rs 70,000 crore by 2018-19. The government has allocated Rs 25,000 crore each in 2015-16 and 2016-17 and proposes to infuse another Rs 10,000 crore this year. The official said mergers would reduce dependence on the exchequer for capitalisation.

Talks of bank mergers gathered momentum after five of State Bank of India’s associate and Bharatiya Mahila Bank merged with the parent entity.

“Consolidation among public sector is structurally positive as they will benefit from operational and functional synergies. Mergers among similar can also result in effective implementation of non-performing asset resolution strategies,” said Krishnan Sitaraman, senior director,

The gross NPAs of public sector rose from Rs 2,80,637 crore in June 2015 to Rs 5,60,841 crore a year later and to Rs 7,38,776 crore in June 2017. The real picture about NPAs started emerging after an asset quality review of initiated by the of India under then governor The SBI scrip closed up 1.7 per cent at Rs 278.75, PNB 3.26 per cent at Rs 142.40, BoB 1.08 per cent at Rs 140.90 and Canara Bank 2.81 per cent at Rs 336.10 on the BSE.

(Additional inputs by Abhijit Lele)

First Published: Thu, August 24 2017. 03:27 IST