Indian cabinet gives approval to consolidate 10 public sector banks

5 Mar 20

The Indian cabinet has given the green light to merge 10 public sector banks into four with effect from 1 April.

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State Bank of India

State Bank of India, by Digamber

The proposal will see the Oriental Bank of Commerce and United Bank of India merge into Punjab National Bank; Syndicate Bank into Canara Bank; Andhra Bank and Corporation Bank into Union Bank of India; and Allahabad Bank into Indian Bank.

These banks will join three more existing larger public sector banks in India, the State Bank of India, Bank of Baroda, and Bank of India, taking the national total to seven.  

A cabinet statement said: “The mega consolidation would help create banks with scale comparable to global banks and capable of competing effectively in India and globally.

“Greater scale and synergy through consolidation would lead to cost benefits which should enable the public sector banks to enhance their competitiveness and positively impact the Indian banking system.”

Each of the banks will have funds in excess of 8tn rupees.

Consolidation will increase the banks ability to support larger lending operations and have competitive operations due to greater financial capacity.

The adoption of best practices across will also enable the banks to improve their cost efficiency and risk management, and boost financial inclusion, the cabinet announcement said. 

Prior to consolidation in 2017, there were as many as 27 public sector banks in country. 

Last year, Dena Bank and Vijaya Bank were merged with Bank of Baroda, and prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with the State Bank of India.

The cabinet also said, with the adoption of technologies across the consolidated banks, access to a wider talent pool, and a larger database, the banks would be in a position to gain competitive advantage. 

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