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Statsguru: How PSBs deal with integration in a challenging biz environment

The RBI in December 2019 noted that private sector banks accounted for 69 per cent of incremental loans in 2018-19

Sachin P Mampatta 

banks, statsguru, banking. Illustration: Binay Sinha
Analysts would be keenly watching as to how the entities deal with the integration in a challenging business environment.

The announcement of swap ratios for the combination of 10 (PSBs) into four has put the spotlight on such unions, and how they have fared before. Analysts would be keenly watching as to how the entities deal with the integration in a challenging business environment.

Each of the 10 participating in the process has more than it did five years ago (chart 1), though much of it is to do with better disclosures. The slowing economy has reduced credit offtake (chart 2). ratios are expected to largely worsen for the anchor banks, though net non-performing assets show a decline for some (chart 3). This also holds true for capital adequacy. The anchor will see their capital cushion decline in at least two instances, show analyst estimates (chart 4).

However, this is not unique to the latest exercise. Previous attempts of bringing together PSBs may have helped the weaker ones, but tended to weigh on the anchor banks. The saw its net non-performing assets go up after its 2017 merger with its associate banks and the Bharatiya Mahila Bank.

This was also true for Bank of Baroda’s 2019 merger with and (chart 5). The capital adequacy ratio also declined in both instances (chart 6).

The latest set of mergers is likely to take time to iron out the kinks, suggest analysts. The in December 2019 noted that private sector banks accounted for 69 per cent of incremental loans in 2018-19. They also had a similar share in deposits. It remains to be seen if bigger PSBs would be able to protect market share.


is a weekly feature. Every Monday, Business Standard guides you through the numbers you need to know to make sense of the headlines. Compiled by BS Research Bureau

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First Published: Mon, March 09 2020. 01:17 IST
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