Finance Ministry, Government of India has announced the deadline for additional four public sector bank (PSB) merging by December this year. This time they have picked Punjab National Bank (PNB), Bank of Baroda (BOB) , Bank of India (BOI) and Canara Bank as the larger entity and possible acquirers. Recently these these banks along with few regional have made presentations to the government. Government has also sought the advises of Niti-Aayog and specifically stated that in this round of Bank Merger, Public Sector Banks may not be picked purely on the basis of size.
Rumor are currently on card for Regional banks such as Canara Bank, Vijaya Bank and Syndicate Bank as they are already in talks for a proposed merger.
Askbanking is having the confirmed news from the finance ministry that they have asked four big bank as stated above to explore the possibility of merging with Mid or small sized banks.Later they also have to take the concern of CCI (Competition Commission of India).
Punjab Natinal Bank who has gone through the balance sheet of Allahabad bank has shown their inability due to higher Non performing Assets (NPA) of Allahabad Bank which is about 7000 crores. Allahabad Bank is advised to bring it down to Rs 5000 crore by Q3.
All these banks including Syndicate bank, Vijaya Bank has made presentation to the government on whether they are in a position to merge with smaller banks and the synergies that various combinations may throw up.
Government is excited with the consolidation process of State Bank of India (SBI) with associate banks and their success. State bank improve their ranking in world and stood 42nd largest bank in the world. Although government has not kept the proposed last date for mergers but it is assumed that the process appears to have been kick-started already.
The Major issues of Proposed mergers are :
- Overlapping of branches
- Technical integration as the CBS software are used by various banks are different
- Anti-competition concerns that could emerge
- Concern by government on counterproductive
- Verifying the proposed strength of merged entity
- Profitability concern post merger
The merged entity of State Bank of India reported a net loss of Rs 3,000 crore in contrast to the standalone net profit of Rs 2,815 crore reported by the parent bank.
What Would be the Proposed Merged Entity ?
Government has clearly mentioned that the Merger candidates may not be picked purely on the basis of size. Some small but financially stable banks are also in dialogue to merge with their peers like syndicate bank.
Some of the Bengaluru-based banks which share their headquarters, such as Canara Bank, Vijaya Bank and Syndicate Bank are already in talks for a proposed merger. Similarly, Kolkata-based Allahabad Bank and UCO Bank may also form a combined entity.