Published: Fri, August 30, 2019
Markets | By Otis Pena

Mega bank merger? Sitharaman's meet with PSU chiefs sparks speculation

Mega bank merger? Sitharaman's meet with PSU chiefs sparks speculation

The Union Bank of India will take over the Andhra Bank and the Corporation Bank to become the fifth-largest public sector bank. Consolidated Union Bank of India, Andhra Bank and Corporation Bank will be the 5th largest public sector banks with Rs 14.6 lac crore business.

The union said in the process of merger, SBI had closed over 1,000 branches and in case of Bank of Baroda, more than 500 branches are being closed.

Post consolidation, the number of PSU banks will come down from 27 to 12 and this, according to Sitharaman, was "the right number of PSU banks to have".

The decision is in line with the NDA government's push for consolidation of state-run banks, which it believes will not only lead to economies of scale, but also make lenders stronger, more competitive and improve their risk-taking appetite. The combined advances base of the new bank will be Rs 6.39 lakh crore and the deposit base will stand at Rs 8.2 lakh crore.

The government has been taking steps to boost investment in the country, and to aid sectors such as banking and auto manufacturing.

The government on Friday announced Rs 55,250 crore upfront capital infusion in state-run banks for credit growth and regulatory compliance to support the merging lenders. "It will have the second largest branch network in India, with 11,437 branches", Sitharaman adds. Asked about any plan for giving relief to home buyers, Finance Secretary Rajiv Kumar said the Ministry of Housing and Urban Affairs is looking at it and soon some measures will be announced.

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Bank of India and Central Bank will remain independent.

After the merger, Canara Bank and Syndicate Bank will be 4th largest public sector bank with?15.2 lakh crore business.

Responding to a query on Congress' reported comment on running an "unfit economy", she said the opposition party should not comment on the economy being "fit or unfit".

Sources reasoned that Delhi-headquartered Punjab & Sind Bank could have been left out of the mega PSB merger as the BJP did not want to disturb its political equation with ally Shiromani Akali Dal and rub the powerful Shiromani Gurudwara Prabhandak Committee, which controls all historical Gurudwaras in the country, the wrong way.

These were State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad and also Bharatiya Mahila Bank effective April 2017. This, the government feels, will make bank balance sheet stronger with greater capacity to lend.

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