India: Centre rules out new PSU bank mergers

New Delhi: The Centre may not consider merger of public sector banks (PSBs) as several reforms undertaken by the government in the banking sector have created systemic improvements and instituted checks and controls to minimise the risk of recurrence of excessive stress, the government said on Tuesday.

In a written reply to a question in the Rajya Sabha, minister of state for finance Pankaj Chaudhary said that several steps have been taken by the government to strengthen the financial condition of PSBs. “The reforms undertaken by the government in the banking sector have created systemic improvements and instituted checks and controls to minimise the risk of recurrence of excessive stress,” Mr Chaudhary said.

To a question on whether the merger of public sector banks is being considered, Chaudhary replied: "No sir". However, the minister further said that PSU banks have shown improvement in their capital adequacy ratio and gross non-performing assets position post-merger. “The merger has helped in improved synergies, economies of scale, better technology integration,” he added.

In the biggest consolidation exercise in the banking space, the government in August 2019, had announced four major mergers of public sector banks, bringing down their total number to 12 from 27 in 2017, a move aimed at making state-owned lenders global-sized banks.

United Bank of India and Oriental Bank of Commerce were merged with Punjab National Bank; Syndicate Bank with Canara Bank; Allahabad Bank with Indian Bank; and Andhra Bank and Corporation Bank with Union Bank of India, effective April 1, 2020.

In 2019, Dena Bank and Vijaya Bank were merged with the Bank of Baroda. Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with the State Bank of India.