FM Nirmala Sitharaman announces merger of 10 public sector banks

Nirmala Sitharaman announces merger of 10 public sector banks

Finance Minister Nirmala Sitharaman, addressing the media on August 30, 2019, made key announcements on bank merger. Just a week after announcing measures to boost the slowing economy, Nirmala Sitharaman announced the merger 10 public sector banks (PSBs) into four entities.

According to the finance minister, Punjab National Bank, Oriental Bank of Commerce, and United Bank will merge into one entity. With the merger, the entity will be the second-largest bank in India which will create Rs 17.95 lakh crore business. The merged entity will have 11,437 branches across the country. The Finance Minister also announced three other PSU bank mergers, including the merger of Canara Bank and Syndicate Bank, the merger of Union Bank of India with Andhra Bank and Corporation Bank, and finally the merger of Indian bank with Allahabad Bank.

Following the merger plan, there will be 12 public sector banks in the system, as against 27 in 2017, the Finance Minister said.

Also read: FM Nirmala Sitharaman: Reduction of GST rates, 70,000 crore boost for state-run banks

The merger of United Bank of India and Oriental Bank of Commerce with Punjab National Bank will make the proposed entity the second largest public sector bank (PSB).

"Punjab National Bank, Oriental Bank of Commerce and United Bank will be brought together and they shall form the second largest public sector bank with the business of Rs 17.95 Lakh crore," Finance Minister Nirmala Sitharaman said.

The consolidated Canara Bank will become the fourth largest bank with the business of Rs 15.2 lakh crore, the Union Bank of India consolidated entity will create Rs 14.59 lakh crore business. After subsuming Allahabad Bank, Indian Bank will be the seventh-largest state-lender with business size of Rs 8.08 lakh crore.

If India has to become a US dollar 5 trillion economy in the next five years, the creation of next-generation banks was imperative, said the finance minister. She said measures taken by the government to strengthen the financial sector has resulted in NPAs of banks coming down

"The NPAs have come down from Rs 8.65 lakh crore in December 2018 to Rs 7.90 lakh crore now," Sitharaman said.

The finance minister also said banks will be provided adequate capital. Last week, she had announced that the Rs 70,000 crore capital infusion for PSBs for the current fiscal would be front-loaded.

(With inputs from agencies)

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