- Now, there will be 12 public sector banks post the latest round of consolidation of PSU banks.
- The government has earlier announced to Infuse Rs. 70,000 Crore In Public Sector Bank
- Earlier, we saw ive associate banks and Bharatiya Mahila Bank combining with State Bank of India during the past term of the Government.
Finance Minister Nirmala Sitharaman has announced four PSU bank mergers so far in the press conference.
- Punjab National Bank + Oriental Bank of India + United Bank of India
- Indian Bank + Allahabad Bank
- Union Bank + Andhra Bank + Corporation Bank
- Canara Bank + Syndicate Bank
Now, in place of fragmented lending capacity with 27 public sector banks in 2017, there will be 12 public sector banks post the latest round of consolidation of PSU banks.
Viz. State Bank of India, Punjab National Bank, UCO Bank, Canara Bank, Indian Overseas Bank, Union Bank of India, Indian Bank, Bank of Baroda, Bank of India, Central Bank of India, Bank of Maharashtra, and Punjab and Sind Bank.
The consolidation of public sector banks will give them scale,” said the Finance Minister.
In addition to this Nirmala Sitharaman also gave the approximate numbers for the amount of capital that will be infused in state-run banks. This capital infusion will be for growth and not for consolidation, she said.
- Punjab National Bank: Rs 16,000 crore
- Union Bank of India: Rs 11,700 crore
- Bank of Baroda: Rs 7,000 crore
- Canara Bank: Rs 6,500 crore
- Indian Overseas Bank: Rs 3,800 crore
- Central Bank of India: Rs 3,300 crore
- Indian Bank: Rs 2,500 crore
- UCO Bank: Rs 2,100 crore
- United Bank: Rs 1,600 crore
- Punjab & Sind Bank: Rs 750 crore
The Finance Minister said that having strong governance at state-run lenders is as important as merging weak ones with the strong ones.
Highlighting the significant changes in the banking sector under the government of Prime Minister Narendra Modi, Nirmala Sitharaman said the reforms have helped banks recover from NPAs ‘ stress over the past few years. The reforms have boosted the banking economy and she added that the recurrence of previous weakness is unlikely now.
She also announced a series of reforms aimed at this:
- PSBs will recruit a chief risk offer from the market, at market-linked compensation.
- Board committee of nationalized banks will appraise the performance of the general manager and above-level employees.
- To enable succession planning, boards will decide the system of individual development plans for all senior executive positions.
- PSBs will also be given the flexibility to prescribe the residual service of two years to appoint general manager-level employees.
- Large PSBs have also been given the flexibility to enhance the sitting fees of non-official directors on the board.
- The management committee loan sanction threshold has been enhanced to 100 percent.
Five associate banks and Bharatiya Mahila Bank were combined with State Bank of India during the past term of the Modi government. Similarly, as of 1 April 2019, Dena Bank, Vijaya Bank combined with Bank of Baroda. According to the 1970 and 1980 Banking Companies (Acquisition and Transfer of Undertakings) Acts, before preparing a merger scheme, the govt must consult the Reserve Bank of India (RBI).