Cabinet approves mega merger of public sector banks, to come into effect from April 1

The Union Cabinet, chaired by Prime Minister Narendra Modi on Wednesday (March 4) approved the mega consolidation of ten Public Sector Banks into four, including the amalgamation of Oriental Bank of Commerce and United Bank of India 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.

The amalgamation would come into effect from April 1, 2020 and would result in the creation of seven large PSBs with scale and national reach with each amalgamated entity having a business of over Rupees Eight lakh crore. 

The consolidation of these banks would play an important role in creating 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 PSBs to enhance their competitiveness and positively impact the Indian banking system.

The consolidation would also provide impetus to amalgamated entities by increasing their ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity," said PIB in a statement. The adoption of best practices across amalgamating entities would enable the banks improve their cost efficiency and risk management, and also boost the goal of financial inclusion through wider reach, added the statement.

Finance Minister Nirmala Sitharaman said that the Centre has been in regular touch with these banks and there will be no regulatory issues. "The banks' merger is on course and decisions have already been taken by the respective bank boards," Sitharaman told the media.