- Government has announced a merger of ten public sector banks(PSBs) into four larger entities.Now,the total number of PSBs after consolidation will come down to 12 from 27 in 2017.
- The banks which are merged are (a)Punjab National Bank, Oriental Bank of Commerce and United Bank of India to merge to form the country’s second-largest lender (b)Canara Bank and Syndicate Bank (c)Union Bank of India to acquire Andhra Bank and Corporation Bank and (c)Indian Bank to merge with Allahabad Bank.
- The consolidation of PSBs will helps in strengthening the PSBs presence globally, nationally and regionally.It will also lead to operational efficiency gains which will reduce their cost of lending.
- However,the banks that are getting merged are expected to see a slowdown in decision making at the top level as senior officials of such banks would put all the decisions on the back-burner and it will lead to a drop in credit delivery in the system.
- Further,a complex merger with a weaker and under-capitalized PSB would stall the bank’s recovery efforts as the weaknesses of one bank may get transferred and the merged entity may become weak.
