If believe the recent reports, these seven public sector banks (PSB) will be merged within six months i.e. United Bank of India, Indian Bank, Bank of Maharashtra, Central Bank of India, Punjab and Sind Bank, Indian Overseas Bank and UCO Bank.
The main reason for possible merging is that seven PSBs, especially United Bank of India, could miss the August deadline to meet the 25% public float norm. As of end-March, the government held more than 75% in seven PSBs.
Reason for Possible Merging
These bank were given deadline of August to meet the 25% Public float by SEBI. Till date it is not being achieved and possibility is there that these bank could miss the August deadline to meet the 25% public float norm.
If they would not achieve by July , the finance ministry may request capital markets regulator Securities and Exchange Board of India (SEBI) to extend the deadline for these PSBs.
As of end-March, the government held more than 75% in seven PSBs — United Bank of India, Indian Bank, Bank of Maharashtra, Central Bank of India, Punjab and Sind Bank, Indian Overseas Bank and UCO Bank.
According to norms, the government’s stake in public-sector units should not be more than 75% by August 2017.
The government stake couldn’t be more than 75% in any of the Bank but few of these banks need capital infusion to run the business as like in Bank of India (BOI) the government’s shareholding is as high as 73.72%, which could breach the ceiling after receiving capital infusion again in the current fiscal.
Similarly, United Bank of India beside other peers bank like UCO bank are on the same boat. There are lot of possibility that few of these bank may merged with some bigger lender, If implemented, the merger could alter the government’s shareholding pattern in future in some of the PSBs. The government held as much as 85.23% in United Bank and 76.67% in UCO Bank as of end-March. The government has also announced a Rs 10,000-crore capital infusion in some of these PSBs in 2017-18, following which the government’s shareholding in these banks could rise further.
If the merger of some of these banks is effected, as is speculated, the government’s shareholdings in the larger entities may change.Some of these PSBs are already reeling under toxic assets and also need capital infusion this fiscal, the possibility of the government’s shareholding in them being trimmed to the desired level by August looks bleak. Hence, the only possibility is merger of these seven banks.
In 2014, the government had notified rules for a minimum 25% public shareholding in listed state-run companies.