Government unveils mega bank mergers

  1. 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.
  2. 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.
  3. 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. 
  4. 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.
  5. 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.