Coronavirus outbreak: Consolidation in PSB space now a reality

The landscape of the Indian banking will see a change with the consolidation of 10 public sector banks (PSBs) into four, effective April 1. The mega exercise comes at a time when the country and financial system is grappling with adverse fallout of the Covid-19 pandemic.
 

Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will merge into Punjab National Bank. Mumbai-headquartered Union Bank will absorb Hyderabad-headquartered Andhra Bank and Mengaluru- headquartered Corporation Bank. Bengaluru-headquartered Canara Bank will take Syndicate Bank and Indian Bank will acquire Kolkata-headquartered Allahabad Bank.
 

Each of the amalgamated entities with scale and national reach would have a business of over Rs 8 trillion.

The consolidation is expected to help create banks with scale comparable to global banks and capable of competing effectively in India and globally. Greater scale and synergy through consolidation would lead to cost benefits, which should enable the PSBs enhance their competitiveness and positively impact the Indian banking system.

The adoption of best practices across amalgamating entities would enable the banks improve their cost efficiency and risk management, and also boost the goal of financial inclusion through a wider reach.
 

Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with State Bank of India.