Amalgamating 10 govt banks into 4 entities in mega consolidation move: FM

After today's mergers, the count of government-owned banks will come down to 12 from 27 in 2017

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.

Addressing a press conference in the capital today, Finance Minister Nirmala Sitharaman announced a slew of consolidation moves in the public sector banking space. 

The first merger, she said, would involve Punjab National Bank, Oriental Bank of Commerce and United Bank of India, to create the second-largest public sector bank in terms of business and branch network. Sitharaman said the total business of the combined entity would reach Rs 17.95 trillion, while its network would grow to 11,437 branches.

Sitharaman said the merger would bring about high CASA and therefore higher lending capacity, even while asserting that the tech platform the three merged banks will use will be compatible.

Another round of consolidation would involve two south-based lenders -- Canara Bank and Syndicate Bank -- in a move that will create the fourth-largest public sector bank in the country in terms of business, Sitharaman said, adding that the business would worth more than Rs 15 trillion. The move would also create the third largest network of over 10,000, ensuring continuation of services for all customers.

A third consolidation move would see the merger of Union Bank of India, Andhra Bank and Corporation Bank to create the fifth-largest public sector bank, with a total business of Rs 14.59 trillion. This would also be the fourth largest bank in terms of network, with as many as 9,609 branches. Other advantages of this consolidation, Sitharaman said was large cost reduction, cost savings for the subsidiaries of each merged entity, and tech compatibility. 

The fourth merger between Indian Bank and Allahabad Bank would create the seventh-largest public sector bank by business at Rs 8.08 trillion, which is 1.9 times the current size of Indian Bank.

Punjab and Sindh Bank, Bank of Maharashtra, and UCO Bank have been left untouched.

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 PSB by loans in the country.