The Union Cabinet has approved the merger of 10 public sector banks into four, paving the way for the largest consolidation among the state-owned lenders.
The banks' boards will now have to finalise the share swap ratio, Finance Minister Nirmala Sitharaman said after the cabinet meeting on Wednesday. The government or banks will not seek any exemption from regulators to fast-track the merger process, and due process will be followed, she said.
The government had in August last year announced its plan to merge 10 public sector banks into four, bringing down the number of state-owned lenders to 12 from 21. The merger, Sitharaman had then said, would help in better management of capital. The merger would be effective from April 1, 2020.
According to the plan:
- Punjab National Bank will take over Oriental Bank of Commerce and United Bank.
- Canara Bank will take over Syndicate Bank.
- Union Bank of India will take over Andhra Bank and Corporation Bank.
- Indian Bank will be merged with Allahabad Bank.
Consolidation among public sector banks has been on the agenda for the National Democratic Alliance since 2014, when it first came into power. In 2017, State Bank of India was merged with five of its associate banks and Bharatiya Mahila Bank. In 2018, it decided to merge Bank of Baroda with Vijaya Bank and Dena Bank. The government also allowed Life Insurance Corporation of India to take over 51 percent equity in IDBI Bank Ltd., effectively privatising it.
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