Cabinet likely to approve mergers of 10 public sector banks into 4 today

The Centre might approve the scheme for amalgamation of 10 public sector banks (PSBs) into four on Wednesday, an official source said.
 
The Union Cabinet, led by Prime Minister Narendra Modi, is scheduled to meet on Wednesday and is expected to approve the amalgamation of the PSBs. According to the scheme, which has been put up for the Cabinet’s approval, the merger of the balance sheets will be completed by April 1. Subsequently, the boards of all the 10 PSBs will meet to approve the swap ratios.
 
The scheme will have provisions to safeguard the rights of workers in these banks. It will state that the pay and allowance given to bank employees should not be lower than what they got before the merger.

 

This will be the biggest merger exercise of PSBs, which was announced by Finance Minister Nirmala Sitharaman in August 2019. Punjab National Bank, Oriental Bank of Commerce and United Bank of India will combine to form the nation’s second-largest lender; Canara Bank and Syndicate Bank will merge; Union Bank of India will amalgamate with Andhra Bank and Corporation Bank; and Indian Bank will merge with Allahabad Bank.
 
A top PSB executive said after the government’s notification related to the scheme of amalgamation, banks will take 6-7 weeks to complete the process. The banks will set up a “grievance redressal committee” to address the concerns of minority shareholders. A window of 21 days will be given to the minority shareholders to raise concerns.

 
In the Union Budget of 2020-21, the government provided relief to these banks by allowing them to carry forward the losses and depreciation of banks that are being merged — a move that would substantially reduce tax outgo.
 
“The losses of the merging banks have been allowed to be carried forward for setting off against profits. This will be a big relief. For instance, when Dena Bank merged with Bank of Baroda, all its losses went into the latter’s books,” Finance Secretary Rajiv Kumar said in a media interaction on Sunday.
 
According to the provision in the Finance Bill, banks will be allowed to carry forward and set off accumulated loss and unabsorbed depreciation during the merger process. This was one of the key demands of the 10 PSBs.