As the consolidation move of public sector banks (PSBs) is in full swing, the Government is planning to begin the merger process by September this year. Initially, the Finance Ministry will go for at one or two merger cases for PSBs in which bigger banks such as Canara Bank, Bank of Baroda (BoB) and Punjab National Bank (PNB) are expected to be among anchor banks for the prospective mergers.
After successful merger of five associates and Bharatiya Mahila Bank (BMB) with State Bank of India in April this year, the Finance Ministry officials have already held meetings with the top brass of 10 State-owned banks recently and the bank bosses have been informed about the state of affairs in the PSBs and the possible tools they could use to help to consolidate the sector.
“We have already met all the chiefs of PSBs and we have decided to start the process as soon as possible. The merger process of such banks by September this year cannot be ruled out and we expect the consolidation course of action even before September this year. The Government may look at one or two merger cases for PSBs in which Canara Bank, BoB and PNB maybe among top anchor banks for the mergers,” a top Finance Ministry sources told The Pioneer.
When asked about the present status of the merger, sources, however, said, “The concept paper on the proposed PSU banks merger is ready with us and the merger will be guided by bigger banks’ regional expansion plans. After merging 1-2 cases of PSBs, we may consider East-based PSBs later for consolidation.”
On the contrary, the Government had declined for the merger last week, saying that there is no proposal for consolidation of PSBs at present. “There is no such proposal under the consideration of the Government for consolidation of PSBs at present,” Minister of State for Finance Santosh Kumar Gangwar had said in a written reply to the lok Sabha.
But as of now, it is, however, expected that the possible merger will create at least 4-5 big national banks which can compete globally. Initially, the Government plans to merge one or two big banks and later it will expand after the successful merger. Besides, some approval from Competition Commission of India (CCI) is needed for the prospective merger. “As far as 4-5 big PSU banks are concerned, it is not possible at one go in the country but we will do it phase wise, instead. Initially, one or two big banks will anchor the merger process with small PSBs with a big bank. The merger proposals in such cases will also need clearance from the competition watchdog Competition Commission of India (CCI),” sources said. For the PSB’s merger, there are various factors, including financial performance, which have to be looked into before a merger decision. “There are factors like regional balance, geographical reach, financial burden and smooth human resource transition that have to be looked into while taking a merger decision,” sources said, adding that there should not be merger of a very weak bank with a strong one as it could pull the latter down. “Of course, the merger process is going to be a complex exercise for us. let the June-quarter numbers of all banks be finalised first, then there could be some action on this front," said one of the officials in the Finance Ministry. The Ministry had also called few banks including Dena Bank some months ago to get a sense from them about their financial position like capital adequacy ratio and NPAs and core banking solution (CBS) technology that they operate on.
In the last consolidation drive, 5 associates and Bharatiya Mahila Bank (BMB) became part of SBI on 1 April 2017, catapulting the country's largest lender to among the top 50 banks in the world. State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides BMB, were merged with SBI.