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India merges public sector banks; 27 reduced to 12

Aug '19
Pic: Department of Financial Services, Ministry of Finance, Government of India
Pic: Department of Financial Services, Ministry of Finance, Government of India
Indian finance minister Nirmala Sitharaman announced on August 30 the merger of several public sector banks (PSBs) to revive the sector and achieve the target of a $5-trillion economy. The decision, aimed at making PSBs global in size, brings down the number of PSBs to 12 from 27 in 2017. In April 2017, the State Bank of India (SBI) merged with five associate banks.

The Punjab National Bank, the Oriental Bank of Commerce and the United Bank of India have been merged to form the second-largest PSB in the country after the State Bank of India (SBI). With a business of ₹17.95 lakh crore, the merged PSB will have a network of 11,437 branches.

Sitharaman announced the consolidation of Canara Bank with Syndicate Bank to form the fourth-largest PSB with a business of ₹15.20 lakh crore. The merger of Union Bank with Andhra Bank and Corporation Bank will form the fifth-largest PSB with 9,609 branches, she told reporters.

The Indian Bank will be merged with the Allahabad bank with a business of ₹8.08 lakh crore, 1.9 times of Indian Bank and covering south, north and eastern sectors.

The development comes a week after the minister announced measures to revive economic growth.

The Bank of India and Central Bank of India will continue as central banks with a national presence. The Indian Overseas Bank will continue its operations in the south, the Uco Bank will operate in east India and the Punjab and Sindh bank will continue with 1.71 lakh crore business in the north.

To further empower the PSB boards, the minister announced that the board committee of PSBs can appraise the performance of position of general manager and above. PSBs can also recruit a chief risk officer from the market, and the banks will be given freedom to hire the officer at market rates to ensure quality personnel. These boards can also decide a system of individual development plans for all senior executive positions.

To strengthen the board committee system, Sitharaman said flexibility will be offered to boards of large PSBs to enhance sitting fees of non-official directors (NODs). These boards will also be given the mandate to reduce or rationalise board committees.

NODs now will perform a role analogous to independent directors, thereby enhancing their position. Boards will also be given a mandate for the training of directors, and the NOD’s performance will be reviewed annually on a peer review basis. To boost leadership, the strength of executive directors has been raised to four in larger banks.

The government will announce measures to help credit growth and set up specialised agencies to monitor every loan above ₹250 crore to ensure that a strong early warning system is in place, Sitharaman added. (DS)

Fibre2Fashion News Desk – India

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