Indian Banking system is currently focused under the cloud of merger and each day started with a fresh rumor. Now Finance Ministry has asked the larger big four Public Sector Bank i.e. Bank of Baroda, Canara Bank, Bank of India and Punjab National Bank to look after the possibility of merging of small and mid sized banks by 31st December. These larger banks are also advised not to merger the NPA laden banks. The main idea behind this is to create another world class bank for International market as like state bank of India (SBI).
The successful merging of State Bank of India has opened the way for further such exercise. The factors which are to be considered while merger and acquisition are regional balance, geographical reach, financial burden and smooth human resource transition.
They are advised to stay away from the very weak bank as it could pull the latter down. Government is waiting for report from Niti Aayog as they were given task of creating the road map for the second round of consolidation in the banking sector. Real picture will appear only after the report of Niti Aayog on Bank merger.
Niti Aayog is giving report this quarter itself.
In the last consolidation drive, five associates and Bharatiya Mahila Bank (BMB) became part of SBI on 1 April 2017, catapulting the country’s largest lender to among the top 50 banks in the world. State Bank of Bikaner and Jaipur (SBBJ), State Bank of Hyderabad (SBH), State Bank of Mysore (SBM), State Bank of Patiala (SBP) and State Bank of Travancore (SBT), besides BMB, were merged with SBI.