Cabinet approves merger of 10 PSBs into 4

10 PSBs to soon turn into four mega banks, gets cabinet nod

The Cabinet approved the amalgamation of the 10 public sector banks (PSB) into 4 PSBs that was announced on August 30, 2019. The nod was given today and the merger would come into effect from April 1, 2020. The Cabinet's approval will lead to the merger of -

  • Oriental Bank of Commerce and United Bank of India into Punjab National Bank;
  • Andhra Bank and Corporation Bank into Union Bank of India;
  • Syndicate Bank into Canara Bank; and
  • Allahabad Bank into Indian Bank

FInal PPT for Banks amalgamationThe merger of the 10 banks will lead to the creation of stronger establishments that will be able to meet the challenge of a $ 5 trillion economy. At present, India has 18 state-owned banks compared with 27 in 2017. After the merger, the number will further come down to 12.

This merger would follow in the example of the amalgamation of Bank of Baroda, Vijaya Bank, and Dena Bank last year.The amalgamation of the two banks into Bank of Baroda was extremely successful, according to the government. Bank of Baroda, after the merger, had posted strong financial results as compared to results before the merger with the operating profit up by 11.4% (Rs. 1,487 crore), deposits increasing by 8.8%, capital ratio increasing by 171 basis points, and retail lending growing by 15.3%.

For existing customers of all the amalgamating banks, the number of branches of the banks will compound, giving more than 3,000 stations to do their banking from. The investment in technology-enabled smart banking will lead to improvements such as paperless tab-banking, faster loan processing, banking from home, and customer-need driven credit offers.

Businesses will benefit through increased lending capacity, with the regulatory ceiling for lending to individual borrowers increasing by more than ₹1,500 crore to ₹3,000 crore.

Source: Department of Financial Services, Ministry of Finance, ET, Business Today, LiveMint

Public sector banks announce share-swap ratios ahead of April 1 merger

The boards of 10 public-sector banks on Thursday approved mergers and issued share-swap ratios to create four large banks in the economy.

The four anchor banks will be Punjab National Bank, Canara Bank, Union Bank of India, and Indian Bank. The merger will be effective from April 1.

According to notifications to the stock exchanges, PNB will issue 1,150 shares for 1,000 shares of Oriental Bank of Commerce, and 121 shares for 1,000 shares of United Bank of India.

Union Bank of India will issue 325 shares for 1,000 shares of Andhra Bank, and 330 shares for 1,000 shares of Corporation Bank.

Canara Bank will issue 158 shares for 1,000 shares of Syndicate Bank.

Allahabad Bank said for every 1,000 shares (face value Rs 10) of Allahabad Bank, there would be 115 shares (face value Rs 10) of Indian Bank.

The Union Cabinet had approved the consolidation to build the mega banks “to create more efficient and bigger public sector banks in the challenging environment to meet the credit needs of a growing economy and to achieve operational efficiency by scale of business”. The amalgamation will lead to a wide geographical reach, technology adaption, and, more importantly, better utilisation of scarce capital.

A grievance redress system has been put in place, and a committee has been formed headed by a retired judge. If shareholders have any issue with the swap ratio — for example, if they feel they didn’t get enough time or if they need information — they can raise it. This is the board-approved swap ratio.

“After the committee receives all the grievances, it will have seven days to recommend changes, if needed, which will be the final swap ratio,” said a top official of a PSB to be merged.

Source: Business Standard

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.