Government creates banking behemoths to boost India's flagging economy

India is merging its state-run banks to form fewer and stronger lenders, as Prime Minister Narendra Modi looks to boost credit and revive economic growth from a five-year low.

Punjab National Bank, Oriental Bank of Commerce and United Bank of India will combine to form the nation’s second-largest lender, Finance Minister Nirmala Sitharaman said at a briefing in New Delhi on Friday. Canara Bank will join Syndicate Bank; Union Bank of India with Andhra Bank and Corporation Bank; and Indian Bank with Allahabad Bank. Together, they will hold business worth Rs 55.8 trillion.

News of the mergers comes minutes before official data is expected to confirm a fifth-straight quarter of slowing economic growth. Soured debt of about $130 billion, much of it on the books of state-run banks, had been curbing fresh lending, restricting scope for a revival in investment.

Last year, government helped facilitate a merger of Dena Bank and Vijaya Bank with Bank of Baroda, creating the third-largest bank by loans in the country.