Published: Tue, September 03, 2019
Markets | By Otis Pena

Bank mergers: FM Sitharaman says amalgamation won't lead to any job loss

Bank mergers: FM Sitharaman says amalgamation won't lead to any job loss

This brings the total number of government-run banks down to 12 from 27.

SBI Chairman Rajnish Kumar said, "Today's announcements also underline the fact that the government recognizes the importance of a robust banking system in achieving the goal of United States dollars 5 trillion economy as bigger banks will be better armed to meet the credit needs of a fast growing economy like India".

Canara Bank will join Syndicate Bank; Union Bank of India with Andhra Bank and Corporation Bank; and Indian Bank with Allahabad Bank.

India Ratings head of financial institutions Prakash Agarwal said the mergers are mostly among larger banks, with absorbing bank not necessarily in strong health.

"Absolutely, ill informed. I want to assure every union in everyone of these banks to please recall what I have said last Friday. Neither, it is the case that a weak bank is merged with a strong one nor geographically compatible banks are being merged", the association said in a statement. See the example of three banks merging with Bank of Baroda. This will make it the second-largest Public Sector Bank in the country with Rs. 18 lakh crore business.

Chairman and chief executive officer, Edelweiss Group, Rashesh Shah said, "The consolidation in the banking sector will create higher efficiencies through better utilization of capital, greater credit disbursal, focused customer service and global expansion opportunities".

As a result, Punjab National Bank will get Rs 16,000 crore, Union Bank of India Rs 11,700 crore, Canara Bank Rs 6,500 crore and Indian Bank Rs 2,500 crore.

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Finance minister Nirmala Sitharaman on Sunday allayed fears of job losses following the proposed merger of public sector banks, saying not even one employee shall be removed following the amalgamation.

Finance Minister said that in place of a fragmented lending capacity with 27 PSBs in 2017, there will be only 12 state-run banks. "In our view, the announced capital infusion is unlikely to be sufficient for taking these banks out of PCA in immediate future".

Kumar said the merger will benefits employees working in small banks.

Yet the Union government was merging 10 banks and creating four banks out of them. In April 2017, State Bank merged its five associate banks-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 the Bharatiya Mahila Bank. The merger of Bank of Baroda, Vijaya Bank, and Dena Bank was announced around mid-September 2018 and was effective by April 1, 2019.

"Further, the decision to empower bank boards and operational flexibility in hiring from the market will prioritise robust risk management practices in decision making".

"Accordingly, a meeting of the board of directors to consider the amalgamation will be convened by the bank shortly", PNB said.

According to analysts, the announcement of PSU bank consolidation is a welcome move and a good first step in sustainably turning around the PSU banks.

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