Indian financial sector has faced several issues with Public Sector Banks (PSBs). The Central Government has pumped around ₹3.8 lakh crores in the state-owned banks from FY 11 to FY 20. In August 2019, the Government had declared the merger of the banks stating that it will strengthen the financial sector. It is hoping that the merger will allow them to function at par with the global scale and quality and will help to reduce the burden of bad debts.
Today’s announcements on bank mergers is a cohesive and a clear recognition that bigger banks have that much more able to absorb shocks, reap economies of scale as well as the capacity to raise resources without depending unduly on the exchequer.Rajnish Kumar, SBI Chairman
After the merger, the number of PSBs will reduce to 12 from 27 in 2017. According to the government, this is a big step taken to achieve the target of making India a $5 trillion economy by 2025. Following are the 10 mergers:
- Punjab National Bank will become 2nd largest public lending bank after Oriental Bank of Commerce (OBC) and United Bank of India merge with it.
- Syndicate Bank and Canara Bank will be merged into one Bank.
- Union Bank of India, Andhra Bank, and Corporation Bank will be merged into one Bank.
- Indian Bank and Allahabad Bank will be combined into one.
The bank accounts of customers will be transferred to the respective newly merged banks from April 1. But due to the 21-day lockdown, four leading banks i.e. PNB, Union Bank, Canara Bank, and Indian Bank have decided to postpone the implementation of new rules and regulations in the banking systems and will continue to follow old systems.
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Last year, the trade union of PSBs had protested the government’s proposal of the merger of banks. It was concerned that the merger of banks will impact jobs and will cause problems in operations at some branches. But the Government assured that it will not affect any jobs.