PSU Banks Merger is likely to happen by December End this Year.

The Finance Ministry has decided to keep the concept paper ready for the PSU banks’ merger in a month or so and the proposed merger would be guided by bigger banks’ regional expansion plans. It is expected that the final merger is likely to happen by December end this year.

The SBI had merged with five associate banks to create a behemoth with over Rs 37 lakh crore in assets earlier this year. However, the Finance Ministry wants to merge State-run banks into mega-corporations so that they can stand up to competition from global banks which will eventually be allowed to enter India as part of a WTO deal on services or as part of bilateral or regional free trade pacts.

“The Finance Ministry has been consistently working on the move since the smooth merger of the SBI with its associate banks. We hope the concept paper on the proposed PSU banks merger should be ready in a month or so and the merger will be guided by bigger banks’ regional expansion plans. We have already asked all bank chiefs in this regard, and also sought the expansion plans from all bigger banks such as Punjab National Bank (PNB), Bank of Baroda (BoB), Bank of India (BoI) and Canara Bank for the prospective merger,” a top official in Finance Ministry told The Pioneer. 

It is expected that the possible merger will create 4-5 big national banks in a global competitive format. “The merger may be in the form of regional consolidation so that a north India based-bank takes over a smaller bank from the north and similarly, a strong southern bank with a strong bank from the east” said the top official, adding that there may be some key factors like regional balance, geographical reach, financial burden and smooth human resource transition that have to be looked into while taking a merger decision.

According to sources close to the developments, the Finance Ministry officials have already held meetings with the top brass of 10 State-owned banks recently, and the bank bosses have been informed about the state of affairs in the PSBs and the possible tools they could use to help to consolidate the sector. “The merger proposals in such cases will also need clearance from the Competition Commission of India (CCI),” sources said.

Keeping several issues like bad loan or non-performing asset (NPA) of almost all PSBs, the Government is very much aware of its merger consequences. If it goes with the move by merging a weak bank with another bank in a whimsical manner, then the profitability of the larger bank may be hit to some extent.

When asked about the post-merger scenario and its profitability aspect, another senior official said, “The merger move is to keep our banks in good health and internationally sustainable and competitive. As our banks are mostly listed in the stock exchanges, we cannot burden their prime shareholders with such quirky decisions.”

On Tuesday, the Finance Ministry has also sought help of NITI Aayog and other global consultancy firms to examine the possibility of next round of consolidation of PSBs with an aim to create only a few lenders of global size and scale.

“We expect a detailed report from NITI Aayog on consolidation in about a month or so and some global consultancy firms are also examining the issue,” said a senior Government official, adding that the report of NITI Aayog will set tone and tenure of the roadmap for consolidation in the future.

With the merger, the Government expects there would be a likely improvement in the NPA situation over the next two quarters and some movement on this front should begin soon. Total bad loans of public sector banks rose by over Rs 1 lakh crore to Rs 6.06 lakh crore during April-December of 2016-17, the bulk of which came from power, steel, roads & infrastructure and textile sectors.

Finance Minister Arun Jaitley has always expressed at several occasions that India needs 4-5 big banks of global size and scale, and further consolidation in the banking sector will be done at appropriate time. During 2016-17, the Government had also pumped in Rs 25,000 crore to boost their capital in the State-run banks.

In April 1, 2017, five associates and Bharatiya Mahila Bank (BMB) became part of the SBI, catapulting the country’s largest lender to among the top 50 banks in the world. State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides BMB, were merged with SBI.

The Government in February had approved the merger of these five associate banks with the SBI. Later in March, the Cabinet approved merger of BMB as well. The SBI first merged State Bank of Saurashtra with itself in 2008. Two years later, State Bank of Indore was merged with it.


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Also Read: RBI may use new PCA Framework to Identify weak Banks for Merger.

20 thoughts on “PSU Banks Merger is likely to happen by December End this Year.

  1. If these banks are merged, a bulk of the businesses in the central region will continue to be concentrated with the merged entity. This would firstly ensure more bargaining power and better room for negotiations with borrowers for the merged bank- a move that acts as a natural shield against asset quality concerns. Currently, the smaller PSBs follow larger banks in terms of prioritising lending without exercising adequate caution, and this partly explains why many smaller banks are faced with higher NPA troubles compared to the larger ones.

  2. The SBI had merged with five associate banks to create a behemoth with over Rs 37 lakh crore in assets earlier this year. However, the Finance Ministry wants to merge State-run banks into mega-corporations so that they can stand up to competition from global banks which will eventually be allowed to enter India as part of a WTO deal on services or as part of bilateral or regional free trade pacts.

  3. Merger of banks will create the problem for the bank employee of the bank which will be merged into the another base on
    past expiriance of merging Rajasthan bank in icici


  5. It should be done as early possible because it will raise the moral high of the employees and result will be good

  6. Banking Corporation of Indian should be formed by adding all banks except top five banks.Top five banks should be merged in one entity.Thus SBI,Top 5 Banks in one entity and Banking Corporation of India should exist.

  7. This issue is not resolved by merging north bank merge with north and south bank merge with south, the main concept behind it if north bank merge with south and south bank merge with north , the banking will increase otherwise same problem may occured in the future..because large no. Of branches will be shuted and at the end , north side bank weak in the south and wise versa .


  9. Merger of PSUs will definitely put pressure on the Management as well as the Employees. How the designation of higher executives of the banks will be considered/delegated in view of the limited Executive positions available as a consequence of merger and also the salary structures. Merger will lead to demotion in grades of employees leading to modified salary revision which may possibly result in exit by employees. Short term & long term merits and demerits need to be analysed.

  10. If all the best banks as on date I.e. Canara Bank, PNB, BOB, BOI, UBI etc are merged together to make up another big bank in India(global). And put all other remaining banks (small,medium, loss making etc, together, and create BANKING CORPORATION OF INDIA WITH REGIONAL PRESENCE. This method, mat allow bigger, stronger banks come together to create the SUPER STRONG BANK. THE BANKING CORPORATION OF INDIA OPERATING ON REGIONS WISE SHALLBE MORE EFFECTIVE, -& HAVE BETTER FIGURES TO REPRESENT.

  11. We indians are very famous as far as beating around the bush. The problem is not about how big or small you are. Only droplets make mighty ocean. Anything has to start from zero and then it has evolve from there. It is not that big sized bank will compete with the other global banks, it is the human resource that has to prepare and be ready. Are we ready for that. I myself , a banker, have seen so many things being handled by in an inappropriate way. we as a system should evolve. the first thing is to learn what is management and how to utilise our manpower resource in an optimum way so that as a system our bank grow. Learning has to take place from the time you join any job and that has to be converted into a very useful experience and the same experience has to be passed on to the next generation. during this course of action, one has to develop leadership and managerial qualities alongwith the professional experience. however we have failed in all these aspects. first we have to set right our basics. The way the clerical staffs are employed evenafter 20 years of experience and the way the chief managers and above behave with no managerial abilities are the classic examples why we are not growing as a system. There are so many issues otherthan merger we have to look upon. Merger alone will make our indian banks bigger only in terms of size not in terms of quality and efficiency.

    1. What you have stated is correct. First the internal system has to be checked and corrected before going in for merger. As you rightly said merger will cause bigger size but lesser quality and efficiency.

  12. Merger of PSB in India will increase the burden of Bad loan on the bank whom the
    other bank is going to merge and may result insolvency of bank unless capitalised by Govt.
    our Govt taking two aspect profitability as well as social banking well in time.

  13. बैंकों के मर्जर से हमारा अस्तित्व ही खत्म हो जाएगा।

  14. Amalgamation/ merger with new idently so as no one claim to be superior hence protect individual employee feeling for betterment of any origination.

  15. How it will help to Indian economy growth. Net NPA goes up. Defaulter are increased day by day. All govt efforts fails to control black money. However merger of banking is good option to control money laundering.

  16. why merger? Govt always statement global competition and strengen banking industry…. But today main problem will be main problem in future in a bigger size…. Problem is bad loan which taken big industries so Govt should take step for solve it…..

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