The Union cabinet has approved the amalgamation of 10 state-run banks to create four large entities from April 1. “Sticking to the April 1, 2020 deadline, banks are fully on board. The Cabinet may have given the decision today, they were on course and doing everything that requires to be done so that this (amalgamation) will be effective from April 1,” finance minister Nirmala Sitharaman said after the Cabinet meeting. While the merger had been announced in August, the scheme had to be approved by the Cabinet and bankers fear that the government took time in endorsing the decision as several regulatory requirements have to be completed over the next four weeks.
The banks have been coordinating to work out the post-merger operational details. But before that, the swap ratio and other regulatory approvals from the RBI and Sebi need to be in place. Sitharaman said the government has looked into the impact of Dena Bank and Vijaya Bank’s merger with Bank of Baroda and concluded that the exercise had a positive impact. She said the operating profit of the resulting lender has improved and retail loans are now sanctioned in 11 days (on average) from 23 days earlier.
According to the merger plan, Punjab National Bank will take over Oriental Bank of Commerce and United Bank of India, while Syndicate Bank will merge into Canara Bank. Similarly, Andhra Bank and Corporation Bank will merge into Union Bank of India, and Allahabad Bank into Indian Bank. Government believes that the exercise will create seven large public sector entities with scale and national reach, with each amalgamated entity having business of over £80 billion.
