The finance ministry has requested the massive state-run lenders – reminiscent of Punjab National Bank (PNB), Canara Bank, Union Bank and Indian Bank – to submit a report on the influence of the large consolidation train that they went by means of in April 2020, sources informed FE. The concept is to conduct a complete evaluation of the outcomes of the merger train.
“Among other things, the report is being sought to ascertain whether the intended benefits of consolidations have been reaped and what lessons can be learnt from such exercises. The analysis of the impact is very important for prudent policy-making,” one of many sources mentioned.
The report will possible comprise particulars of their efficiency in numerous features – together with dangerous loans, credit score stream, profitability, price discount and utilisation of assets — because the merger, he mentioned. The 4 massive lenders are prone to current their reviews to the Indian Banks’ Association, which, in flip, is predicted to compile them and submit a complete one to the division of monetary providers, mentioned one other supply.
This is the primary time that the ministry has sought such a complete report on the merger from these banks.
With impact from April 1, 2020, Oriental Bank of Commerce and United Bank had been merged with PNB to create the nation’s second-largest state-run lender; Syndicate Bank was amalgamated with Canara Bank; Andhra Bank and Corporation Bank had been merged with Union Bank, and Allahabad Bank was amalgamated with Indian Bank. Before this, Vijaya Bank and Dena Bank grew to become part of the Bank of Baroda on April 1, 2019.
Last week, in a gathering with chiefs of public-sector banks (PSBs), the finance ministry reviewed their asset high quality, credit score stream and capital-raising plans, and briefly mentioned the consolidation train as nicely, sources mentioned.
The authorities had first introduced the mergers of the ten state-run banks to create 4 bigger entities in August 2019, which took impact from April 2020. This was geared toward creating just a few however sturdy banks with massive stability sheets to fund huge initiatives and assist the rising credit score urge for food of the financial system.
Finance minister Nirmala Sitharaman had then mentioned, India would have 12 “solidly present, well-consolidated, energised, adequately capital-endowed” PSBs. The consolidations in recent times led to the discount within the variety of PSBs to 12 in 2020 from 27 in 2017. Senior ministry officers, too, had mentioned the consolidation would improve the chance urge for food of banks and scale back their prices (as community overlaps go), and branches of the banks could be rationalised with no employees layoff.
The profitable expertise of merging State Bank of India with 5 of its subsidiaries and Bharatiya Mahila Bank, and the amalgamation of Bank of Baroda, Vijaya Bank and Dena Bank had then given the federal government confidence that one other spherical of consolidation may very well be dealt with with out hiccups.
In the interim Budget for 2019-20, the federal government mentioned: “Amalgamation of banks has also been done to reap the benefits of economies of scale, improved access to capital and to cover a larger geographical spread.”
Source: www.financialexpress.com”