Banks: Mega merger takes effect

The government’s mega merger plan to strengthen the financial system came into effect on Wednesday, combining 10 public sector undertaking banks into four. Announced in August last year, the merger combines Punjab National Bank, Oriental Bank of Commerce and United Bank into one lender managing business worth Rs.17.95 lakh crore. After the merger, together these will form the second largest public sector bank in the country, after State Bank of India.

Similarly, Canara Bank stands merged with Syndicate Bank, which will make it the fourth-largest public sector lender.

Andhra Bank and Corporation Bank have been merged with Union Bank of India, and Indian Bank with Allahabad Bank.

All branches of Andhra Bank and Corporation Bank will function as Union Bank of India branches with effect from April 1, 2020.

The big consolidation in the country’s public banking sector is part of the government’s plan of making India a $5-trillion economy by 2025.

With this, the number of public sector banks in India will come down to 12 from 27 in 2017, six merged banks and six independent public sector banks. The branches of the six lenders will operate as part of the four anchor banks, according to the Reserve Bank of India.

Customers, including depositors of merging banks, will be treated as customers of the banks in which these banks have been merged with effect from 1 April 2020.

It was widely speculated that the government may defer the consolidation exercise for some time due to the novel coronavirus pandemic that has affected our economy. In March, however, the cabinet gave its approval for the mergers that will consolidate operations of 10 PSBs into four ‘mega banks’.

The merger comes into force as the country entered the seventh day of a 21-day nationwide lockdown to curb the spread of the deadly coronavirus pandemic, which is threatening world growth. Trade unions of bank officers have, however, been opposing the merger. Only last week, they wrote to the Prime Minister seeking to defer the merger schemes due to the coronavirus-induced lockdown.

Last year, trade unions protested against the mergers stating that the move will impact jobs, disrupting operations at some branches.

The government has maintained that the merger will not cause job losses. The Centre injected about Rs 2.6 lakh crore of taxpayers’ money into state-run banks over the last five years to revive the sector. 

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