Tag: PSU bank merger

From accountability to better hiring, these are the reforms government announced to strengthen public sector banks

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

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Finance minister Nirmala Sitharaman, who announced a mega merger of public sector banks and massive cash infusion, said the intention was not just to give capital but also ensure good governance.

The government is working on strengthening PSU banks and improving their governance, she said in New Delhi on Friday.

Banking experts have long said that just pumping government money alone will not improve the condition of India’s public lenders or suffice to overcome massive bad debt problems.

“Banks will need more capital infusions, improvement in governance – including consolidation – and cuts in government stakes over a period of time,” said Sonal Varma, chief economist at Nomura in Singapore told Reuters recently.

Banks need better systems to expedite settlement of corporate default cases for them to emerge out of the distress,  going by the experience of previous bailout attempts and the build-up of major stresses in the economy and in corporate India.

Almost every week there is talk of another major company getting into financial difficulties or facing an investigation for fraud or other malfeasance, according to a Reuters report.

On Friday, Sitharaman announced the following reforms in the banking sector.

1. To make management accountable to the board. A committee of board should appraise the performance of the general manager and officers above that rank.

2. To make the span of control manageable in large public sector banks. Boards to be given the flexibility to introduce CGM level officers as per requirement.

3. PSBs must be allowed to recruit Chief Risk Officer from market, at market-linked compensation.

4. To enable succession planning, boards to decide system of individual development plans.

5. Boards given flexibility to prescribe residual tenure of two years for GM and above to ensure sufficient tenure.

6. Boards given flexibility to enhance sitting fees of Non-Official Directors.

7. Boards given mandate to rationalise Board Committees for better functioning.

8. Risk management committee to be given mandate to fix accountability for compliance of Risk Appetite Framework.

9. Longer term to directors on Management Committee of Board (MCBs).

10. MCB loan sanction threshold enhanced by up to 100 percent.

11. Non-Official Directors (NODs) to perform role analogues to independent directors.

12. Boards given mandate for training of directors; evaluate NOD performance.

13. ED strength in large banks raised to four.

14. Creation of leadership pipeline under BBB’s Development Programme.

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

Government merges 10 public sector banks into four as it looks to revive growth

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, as it looks to strengthen a sector struggling under a mountain of debt and ensure stronger balance sheets to boost lending and revive economic growth.

Under the merger plan announced by finance minister Nirmala Sitharaman on Friday after meeting PSU bank chiefs, 10 PSU banks will be amalgamated into four entities. The mergers, which cut to 12 the total number of state-owned banks, from 27 in 2017, are the first since Prime Minister Narendra Modi’s government won re-election in May. His government has vowed to clean up the banking sector and reduce the number of state-run banks.

“Consolidated PSBs for strong national presence and global reach is one of the objectives with which we went about this plan. So 82 percent of all PSB business and 56 percent of all commercial bank business will be with them,” Sitharaman reasoned at a press meet.

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. In addition, Andhra Bank and Corporation Bank are to merge with Union Bank, while Indian Bank will merge with Allahabad Bank.

Consolidated PNB+OBC+United Bank to be 2nd largest #PSB with ~₹18 lakh cr. business and 2nd largest branch network in India. Scale, nationwide & global presence, and high CASA to drive growth. @PMOIndia @FinMinIndia @PIB_India #PSBsFor5TrillionEconomy pic.twitter.com/Ir63tTBiam

— Rajeev kumar (@rajeevkumr) August 30, 2019

Syndicate Bank’s  merger  with Canara Bank will create  the fourth largest PSU lender.

Consolidated Canara+Syndicate to be 4th largest #PSB with ₹15.2 Lakh Cr. biz & 3rd largest branch n/w in India. Synergies, culture & common CBS platform to enable quick realisation of operational gains & enhanced lending capacity. @PMOIndia @FinMinIndia #PSBsFor5TrillionEconomy pic.twitter.com/rBT2OgBjZ6

— Rajeev kumar (@rajeevkumr) August 30, 2019

The merger of Union Bank with Andhra Bank and Corporation Bank will create India’s fifth-largest PSU bank.

Consolidated Union+Andhra+Corporation Banks to be 5th largest #PSB with ₹14.6L Cr. business & 4th largest branch network in India. Strong scale benefits to all 3 with biz becoming 2 to 4½ times that of individual bank. @PMOIndia @FinMinIndia @PIB_India #PSBsFor5TrillionEconomy pic.twitter.com/GWjg7WEd1U

— Rajeev kumar (@rajeevkumr) August 30, 2019

Indian Bank and Allahabad Bank will merge to become the seventh-largest PSU bank.

Consolidated Indian & Allahabad Banks to be 7th largest #PSB with ₹ 8.08 lakh cr. business. Strong scale benefits to both with business doubling. High CASA & lending capacity combined in consolidated bank. @PMOIndia @FinMinIndia @PIB_India #PSBsFor5TrillionEconomy pic.twitter.com/fRercARJIU

— Rajeev kumar (@rajeevkumr) August 30, 2019

In terms of business size, this is how the new pecking order of public sector banks in India will be (figures as of March 2019):

1. State Bank of India: Rs 52.05 lakh crore.
2. Punjab National Bank + Oriental Bank of Commerce + Union Bank of India: Rs 17.94 lakh crore
3. Bank of Baroda (including Vijaya Bank and Dena Bank): Rs 16.13 lakh crore.
4. Canara Bank + Syndicate Bank: Rs 15.20 lakh crore.
5. Union Bank + Andhra Bank + Corporation Bank: Rs 14.59 lakh crore.
6. Bank of India: Rs 9.03 lakh crore.
7. Indian Bank + Allahabad Bank: Rs 8.08 lakh crore.
8. Central Bank of India: Rs 4.68 lakh crore.
9. Indian Overseas Bank: Rs 3.75 lakh crore.
10. UCO Bank: Rs 3.17 lakh crore.
11. Bank of Maharashtra: Rs 2.34 lakh crore.
12. Punjab & Sind Bank: Rs 1.71 lakh crore.

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.

The finance minister said that the steps announced were in line with maintaining pace to reach the government’s target of becoming a $ 5 trillion economy.  She said, “We have to lay a strong foundation for the financial sector. As of today Rs 1.9 trillion worth of credit is available in the economy.”

ALSO READ: Public sector bank consolidation at a glance 

The banks which attended the meeting with the finance ministry officials were Punjab National Bank, Union Bank of India, Canara Bank, United Bank of India, Allahabad Bank, Indian Bank, OBC, Syndicate Bank, Corporation Bank and Andhra Bank.

Gains visible from #PSB Reforms: 14 PSBs in profit in Q1FY20, GNPAs down by 1.06 lakh cr., record recovery & highest PCR in 7 yrs. Stage set for #NextGen PSBs. @PMOIndia @FinMinIndia @PIB_India #PSBsFor5TrillionEconomy pic.twitter.com/UUKpVJsgXH

— Rajeev kumar (@rajeevkumr) August 30, 2019

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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

No job losses due to merger of public sector banks, says FM Jaitley

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

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Finance Minister Arun Jaitley on Friday said in Lok Sabha that there would be no loss of jobs due to merger of public sector banks.

Earlier this week, the Cabinet approved merger of Vijaya Bank and Dena Bank with Bank of Baroda. Jaitley said that there would be no job losses due to merger of the banks and that the move would create a bigger entity like the State Bank of India (SBI).

The cost of lending could also become cheaper, he added. During the Question Hour, the minister said that out of the 21 public sector banks, 11 are under PAC (Prompt Corrective Action) framework.

PAC is initiated against banks that have high levels of non-performing assets (NPAs).

Replying to a supplementary question, Jaitley said the curve of non-performing assets would go down and that the Insolvency and Bankruptcy Code has helped in bringing back around Rs 3 lakh crore into the system.

Jaitley said that the State Bank of India (SBI) and other public sector banks have been making operational profits. They incurred losses due to provisioning for non-performing assets, he added.

With regard to recapitalisation of Public Sector Banks (PSBs), the minister said that Rs 51,533 crore has been infused into them in the current financial year till December 31.

“In the budget estimates of FY 2018-19, Rs 65,000 crore has been allocated for recapitalisation of PSBs and an amount of Rs 51,533 crore has been infused in PSBs till December 31, 2018,” he said.

The minister also said that in recent past, Rs 90,000 crore was allocated in the Union Budget and infused in various PSBs by the government during financial year 2017-18.

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

Bank of Baroda, Vijaya Bank, Dena Bank chiefs to meet next week: report

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

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The chief executives of Vijaya Bank, Dena Bank and Bank of Baroda are likely to meet in the first week of December to chalk out a plan to increase the number of organizational layers in the merged entity, Mint reported.

The meeting will be done to take on board the larger workforce of the merged entity, the report said citing a senior banker aware of the talks. The banks, in total, have 85,675 employees and 9,849 branches.

The chiefs of the banks, according to the report, will likely discuss a change in the current two-tier structure of a zonal and regional office, which is followed in Vijaya and Dena Bank.

The plan is to change to a three, that is zonal, regional and head office, followed by Bank of Baroda or even a four-tier structure that is followed in India’s largest lender, State Bank of India, said the report.

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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

Expect merged entity to be in place by April 1, says Bank of Baroda chief

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

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The government had announced the merger of Bank of Baroda, Vijaya Bank and Dena Bank on September 17, to create the country’s third largest lender.

Several meetings have taken place among the bank officials to speed up the merger process. CNBC-TV18 spoke with PS Jayakumar, MD & CEO of Bank of Baroda, to discuss about the merger developments.

Talking about the Bank’s plan for the next one year, he said, “There are three key things. One is to make sure that the transformation journey they embarked on continues to its logical conclusion. Two is to make sure that while the merger process is on, the businesses do not get disrupted and we continue to keep the growth momentum, and so do the other two banks. Three, to see that merger process is done transparently and is fair for all stakeholders.

Jayakumar said that they were working on to see that the combined entity is in place by April 1, 2019.

“As far as synergies go by, the revenue side synergies would happen earlier than the cost side synergies. There are many complementarities that all institutions could benefit from. So initially would focus on revenue side synergies and the cost side synergies would fall in line after the merger process is completed and will probably take longer,” said Jayakumar.

“The final end state would be that we would have one single database with a single system in place but we need to work with the timeline of the process,” he said, adding that they are at a fairly early stage of the process yet and there aren’t too many specific answers to specific questions.

With regards to the capital requirement, Jayakumar said, “The range of capital requirement has been estimated and has been shared with the government. The government has been supportive and they are on record that they will provide the requisite capital because the intention behind this merger is to create a stronger institution of a bigger scale and therefore capital support as is required would be made available is what we have been told and assured,” he said.

When asked if they had headroom/appetite to lend to NBFCs, he said, “The bank has been active in the lending market both with respect NBFCs and others and continue to stay active but specific exposures would depend on variety to factors.”

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Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

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