Here’s what bankers have to say about PSU bank consolidation and recapitalisation

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The government announced a series of mergers involving 10 state-owned banks on Friday. Under the merger plan announced by finance minister Nirmala Sitharaman, 10 PSU banks will be amalgamated into four entities.

Sitharaman said that Oriental Bank of Commerce and United Bank would be merged with New Delhi-based Punjab National Bank. This would create India‘s second-largest lender after State Bank of India

The government also announced that two lenders based in southern India, Canara Bank and Syndicate Bank, would be amalgamated. Syndicate Bank’s merger with Canara Bank will create the fourth largest PSU lender. The merger of Union Bank with Andhra Bank and Corporation Bank will create India’s fifth-largest PSU bank. Indian Bank and Allahabad Bank will merge to become the seventh-largest PSU bank.

ALSO READ: Government merges 10 public sector banks into four — Full coverage 

The government also announced a details of the bank recapitalisation road map. Punjab National Bank will get Rs 16,000 crore from the Rs 70,000 crore total and this will be the largest chunk. Union Bank wil get the second largest chunk worth Rs 11,700 crore.

ALSO READ: Breakup of the fresh money government is injecting into public sector banks

Sunil Mehta, MD & CEO of PNB said, “It is a very welcome move made by the government because we have the internal synergies. This particular amalgamation will give us three basic advantages. With Punjab National Bank (PNB) and Oriental Bank of Commerce having a common synergy area we can optimise on resource utilisation and whereas United Bank of India is rich in CASA and has a better presence in north east as well as in the eastern part of the country. So we will have a larger geographical presence across the country.”

J Packirisamy, MD & CEO of Andhra Bank said, “We are getting merged with Union Bank of India along with Corporation Bank. In our view it is an excellent combination. Andhra Bank is small and Corporation Bank is more strong in south as well as in other areas. Union Bank has presence in western part of the country. There are lot of synergies that we could look for. Union Bank as well as Andhra Bank has got a very young force. Andhra Bank is pretty strong in agriculture and financial inclusion initiatives. Union Bank is Mumbai based banks has its own strengths.”

Rajkiran Rai G, MD & CEO of Union Bank said, “It is more of a synergy because both the banks are coming from south. One is Andhra Bank and the other is Corporation Bank. It will be to our advantage because of the way we are spread in the country. In South India our spread is not that strong and so it will be good synergy.”

RA Sankara Narayanan, MD & CEO of Canara Bank said, “Combined entity will be 4th largest after the amalgamation. We are confident this will give us an opportunity to grow on all the segments particularly with quality.” He added, “We will be taking our proposal to board in maximum 10 days’ time and as far as the integration is concerned  – HR integration may take around 3-6 months’ time from the cut-off date and IT integration will take minimum 12 months though we are on the same platform. Customisation has to be done on our platform as well as Syndicate Bank platform. I am sure that will be a smooth transition.”

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow