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Merger of Public Sector Banks
Since 1 April 2020, 10 public sector banks (PSU) have been merged into four banks. In August 2019, the government announced that 10 public sector lenders would be merged into four bigger and stronger banks in the largest consolidation exercise in the banking space.
This will reduce the number of banks from 27 in 2017 to 12 in India. The government has been widely speculated that the consolidation exercise could be postponed for some time because of the latest coronavirus pandemic that affected our economy.
It is only the desire for growth that acts as a fuel not only for an entrepreneur but also for every professional or corporate enterprise. This strong desire for growth in terms of customer base, balance sheet and benefit has driven companies involved in mergers and acquisitions to move ahead in synergy and onward.
The Indian banks were not aloof from this wave of mergers and acquisitions (M&A), either. Initially banks were combined to save failed banks or banks that were not effective, but the structure changed too much as time went on. Mergers and acquisitions have also been made in recent times on the grounds of business growth, profitability and organizational restructuring.
Here's everything you need to know about the PSU banks' mega merger which will came into force on 1 April:
1) The Oriental Bank of Commerce (OBC) will join the Punjab National Bank (PNB) with United Bank of India. Following the merger, the two will form together, second-largest public sector bank in the country, following the State Bank of India (SBI))
2) Syndicate Bank will become the fourth largest public-sector lender, with integrated into Canara Bank.
3) Indian Bank shall be combined with Allahabad Bank.
4) The Union Bank of India is to be merged with Andhra Bank.
5) Customers, including merging bank depositors, will be treated as customers of the banks in which those banks were merged with effect from 1 April 2020.
6) 12 PSUs-six combined banks and six separate public sector banks-will come into being after the merger.
-- Six merging banks-SBI, Baroda Bank, Canara Bank, Union Bank of India, Punjab National Bank, Indian Bank
--Six separate banks – Indian Overseas Bank, UCO Bank, Bank of Maharashtra, Punjab & Sind Bank, bank of India, Central Bank of India.
7) As of 1 April 2020, the Oriental Bank of Commerce and the United Bank of India will operate as branches of the Punjab National Bank.
8) Syndicate Bank will operate as Canara Bank branch effective 1 April 2020.
9) In the same way, all branches of Allahabad Bank shall be treated as branches of the Indian Bank
10) All branches of Andhra Bank and Corporation Bank will act as branches of Union Bank of India effective as of today, i.e. 1 April 2020.
The cabinet approved mergers earlier this month that will consolidate 10 public sector banks (PSBs) operations into four 'mega banks.'
Mergers are important for the purposes of consolidation and expansion which is why many private sector banks are genuinely interested in mergers and acquisitions in today's scenario. They are also crucial for Economy as most of the time they are successful in saving weak banks that fail to meet expectations.
Merger creates a variety of problems that can cause great damage if the merging process is not being properly executed.
If merging is necessary it must be carried out in a way that leads to an environment of trust and agreement between the people of both organizations. If people, work culture and vision are nicely mixed together, combining certainly would have synergistic effects and create a win-win situation.
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