The government’s mega merger plan to strengthen the financial system came into effect on Wednesday, combining 10 state-run banks into four. Announced in August last year, the merger combines Punjab National Bank, Oriental Bank of Commerce and United Bank into one lender managing business worth Rs 17.95 lakh crore. Similarly, Canara Bank stands merged with Syndicate Bank; Andhra Bank and Corporation Bank with Union Bank of India, and Indian Bank with Allahabad Bank. The big consolidation in the country’s public banking sector is part of the government’s plan of making India a $5-trillion economy by 2025.
Here are 10 things to know about the merger of 10 PSU banks into four:
As the merger scheme takes effect, the four banks that will assume the operations of six others in addition to their own are: Punjab National Bank, Canara Bank, Union Bank and Indian Bank.
The branches of the six lenders will operate as part of the four anchor banks, according to the RBI. In turn, customers and depositors of the merged banks will be treated as customers of the four banks.
The merger comes into force as the country entered the seventh day of a 21-day nationwide lockdown to curb the spread of the deadly coronavirus pandemic, which is threatening world growth.
The move to combine the 10 banks into four at the end of August last year came at a time lenders in the country struggled against a mountain of debt and frauds running into thousands of crores.
Trade unions of bank officers have, however, been opposing the merger. Only last week, they wrote to the Prime Minister seeking to defer the merger schemes due to the coronavirus-induced lockdown.
Last year, trade unions protested against the mergers stating that the move will impact jobs, disrupting operations at some branches.
The government has maintained that the merger will not cause job losses.
Vowing to clean up the banking sector, the government has said that the state-run banks will be strengthened and repositioned to take the economy to the $5-trillion mark.
The Centre injected about Rs 2.6 lakh crore of taxpayers’ money into state-run banks over the last five years to revive the sector.
Meanwhile, the Indian economy – already staring at the worst pace of expansion recorded in more than 11 years – now stares at the fallout from the coronavirus outbreak, which forced the government to announce a 21-day lockdown this month. The government has said it has no intention of extending the current lockdown.
