PSB mergers will not be a cake walk; concerns over NPAs is key

PNB, Canara Bank, Union Bank and Indian Bank seen as candidates to lead the process

Public sector banks’ (PSBs’) stocks had unexpected gains on Wednesday, with the CNX Nifty PSU Bank index gaining over 2 per cent and emerging among the top performers. With the finance minister revealing that an alternative mechanism for the merger of PSBs has been approved by the Cabinet, the stock price of most PSBs went higher by up to three per cent. However, the merger may not be an easy task.

For one, the issue of swelling non-performing assets (NPAs) is already haunting the banking industry, especially public sector banks (PSBs) and corporate-facing private banks. For the quarter ending June