Merger of Public Sector Banks
Merger of Public Sector Banks- The merging of numerous public sector banks has been announced by the central government of India in an effort to increase the efficiency of the banking system. The merging process has been ongoing for a while. The Union cabinet approved the consolidation of Public Sector Banks on March 4, 2020, and it will go into effect on April 1st. Syndicate Bank became Canara Bank, Andhra Bank and Corporation Bank became Union Bank of India, and Allahabad Bank became Indian Bank as a result of the merger of Oriental Bank of Commerce (OBC) and United Bank of India into Punjab National Bank (PNB). Prior to this, the cabinet had authorised the merger of Vijaya Bank, Dena Bank, and Bank of Baroda in January 2019.
What is Merger of Public Sector Banks?
What is Merger of Public Sector Banks? Answer of This Question is In general, a “Merger” is a freely entered agreement between two already existing companies to create a new company. The businesses/firms that consent to the merger are essentially similar in terms of size, clientele, operational scope, and market share. It is often referred to as a “union of equals.”
Merger of Public Sector Banks- Legal Requirements
- The following Acts contain the provisions pertaining to mergers and acquisitions:
- The previous Companies Act, 1956’s Sections 390 to 395 dealt with the laws governing mergers and acquisitions in India.
- Compromises, arrangements, and amalgamations are covered in Chapter VX of the current Companies Act, 2013, which was passed in 2013.
- Additionally, the regulations pertaining to mergers and acquisitions can be found in the Income Tax Act of 1961, the SEBI Takeover Code, and FEMA.
Merger of Public Sector Banks- Causes of Bank Merger
- The weight of accumulating bad loans over the years is a major factor in the merger.
- Intended to ostensibly increase operational effectiveness, governance, and accountability, and facilitate efficient monitoring.
- At the centre of any consolidation push has always been the creation of stronger banks on a worldwide scale, elimination of pointless overlaps in infrastructure and operations, and introduction of economies of scale to reduce costs.
- The goal of the move was to establish next-generation banks with a strong national presence, a global reach, and the ability to increase loans to the many crucial economic sectors.
|Bank of Baroda
|Vijay Bank, Dena Bank
|State Bank Of India
|State Bank of Travancore
State Bank of Hyderabad
State Bank of Bikaner and Jaipur
State Bank of Patiala
State Bank of Mysore
|Union Bank Of India
|Andhra Bank, Corporation Bank
Merger of Public Sector Banks in India- List
One of India’s oldest public sector banks is Canara Bank. Canara Hindu Permanent Fund, the name under which the bank was created in 1906, was later changed to Canara Bank Limited in 1910. The fourth-largest Public Sector Bank in the nation will be created by the merger of Canara Bank and Syndicate Bank. The bank’s overall revenue will be Rs. 15.2 lakh crore. Additionally, it will grow to be India’s third-largest bank branch network.
Union Bank Of India
The Corporation Bank and Andhra Bank were acquired by the Union Bank of India. There is currently 9,609 branches and a combined business worth Rs. 14.59 lakh crore. Union Bank of India received Rs. 11,700 crores from the government for the merger despite having a high net NPA percentage of 6.85%. Union Bank of India is now India’s fifth-largest bank as a result of this merger.
Punjab National Bank(PNB)
United Bank of India and Oriental Bank of Commerce have been acquired by Punjab National Bank (PNB). PNB’s present overall business size has expanded as a result to Rs. 17.95 lakh crores. Additionally, it now has 11,437 branches spread all around the nation.
PNB has surpassed the State Bank of India to become the second-largest public sector bank in India as a result of this merger (SBI).
Indian Bank became the seventh-largest bank in India after merging with Allahabad Bank. Indian Bank’s total annual revenue is Rs. 8.07 lakh crore. There are now 6,104 Indian Bank branches. Indian Bank received Rs. 2,500 crores in capital from the government for the merger despite having a net NPA percentage of 3.75%.
Bank Of Baroda
An international bank from India is called Bank of Baroda. It was founded in 1908 and is currently the third-largest public sector bank in the nation. With a combined business of Rs. 14.82 lakh crore, Bank of Baroda, Vijaya Bank, and Dena Bank would become the third-largest lender in the nation. Its main office is in Vadodara, Gujarat. India’s International Bank is their tagline. Sanjiv Chadha serves as its managing director and CEO.
Merger of Public Sector Banks- Difficulties
- If additional funding is required as a result of the merger, the government would need to provide a substantially larger capital infusion.
- The anchor bank would be subject to governance-related problems if it took on weaker banks.
- Strikes and other issues would be brought on by disgruntled bank employee unions.
- The bigger bank would be under more pressure to deal with the NPAs because they would be combined with those of the smaller banks.
- There is an emotional component to how bank mergers affect clients. Customers may withdraw if the merger and its goals are not promptly disclosed to them, which would result in a loss of revenue.
Merger of Public Sector Banks- FAQs
- After the merger, how many Public Sector Banks are there?
Answer-After the merger, there are 12 Public Sector Banks. Previously, there were 27 public sector banks.
- Which banks were merged, and which remained independent?
Answer-Canara Bank, Punjab National Bank, Bank of Baroda, India Bank, Union Bank of India, and State Bank of India are among the merged banks. Some of the locally focused banks continued to operate independently. They are the Bank of Maharashtra, Punjab and Sind Bank, Indian Overseas Bank, UCO Bank, and the Central Bank of India.
- Which of the State Bank of India’s partner banks were merged?
Answer-State Bank of Travancore, State Bank of Hyderabad, State Bank of Mysore, State Bank of Bikaner and Jaipur, State Bank of Patiala, and Bharatiya Mahila Bank were the affiliate banks that amalgamated with State Bank of India.
- Which Bank and the Indian Bank merged?
Answer-Indian Bank served as the acquiring bank in the merger with Allahabad Bank.
- What was the primary goal of an Indian bank merger?
Answer-The primary goals of the bank merger in India were to strengthen the nation’s economy overall, raise profitability, cut down on the amount of NPAs, boost efficiency, and increase the branch network’s global reach.