Mega-merger of PSU banks turn into reality

Amid nationwide lockdown to contain the rapid spread of Coronavirus and slowdown concerns, mega PSU banks amalgamation for ten banks, came into effect from 1April, that is, in the new financial year 2020-2021.

In the largest banking consolidation of the banking industry, only four will be in existence after the amalgamation of 10 banks. A total of 12 will be operational out of 27 (as in 2017) under public sector undertaking.

The amalgamation will be amongst Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank making it the second-largest PSU. This will be followed by the fourth-largest merger, combining Canara Bank with Syndicate Bank and the fifth largest after combining Union Bank, Andhra Bank & Corporation Bank. The seventh largest bank will be Indian Bank amalgamated with Allahabad Bank, in terms of the asset class.

The share swap ratio will be 1,150 shares of PNB for every 1,000 shares of OBC and 121 shares of PNB for every 1,000 shares of United Bank, 158 shares of Canara Bank for every 1,000 shares of Syndicate Bank, 325 & 330 shares of Union Bank for every 1,000 shares of Andhra Bank and Corporation Bank respectively and lastly, 115 shares of Indian Bank for every 1,000 shares of Allahabad Bank.

The PSU banks merger can help these banks better compete with private players such as HDFC Bank and ICICI Bank. As of the end of FY19 fiscal, data in terms of total business of SBI (with market share of 22 per cent) stood as the banking leader in India, followed by HDFC Bank (7.6 per cent). After the mega merger, PNB (amalgamated) would take second position with a market share of 7.8 per cent.

The consolidation can also be expected to help take NPAs of these banks with better technological upgradation as well as better use of resources & recapitalisation amount given by the government.