Bank employees stage protest against Centre's decision to merge PSU banks

Nirmala Sitharaman

After today's announcement on merger of banks, post-consolidation, India will now have 12 Public Sector Banks from 27 Public Sector Banks. The merger of Union Bank with Andhra Bank and Corporation Bank will create India's fifth-largest PSU bank. But unlike those, Nirmala Sitharaman's announcement on Friday will change the complexion of the Indian banking industry.

"When the size of a bank becomes big, then its business will also grow, resulting in more job creation".

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

PNB is to be the biggest beneficiary, receiving 160 billion rupees, followed by Union Bank with 117 billion rupees.

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He alleged the merger of public sector banks would mean closure of six banks. The Nifty PSU Bank index closed 1.02 per cent higher at 2,474.40, rebounding almost 3.5 per cent from day's low after reports of banks merger news.

After Vijaya Bank was merged with Dena Bank and Bank of Baroda (BoB), three other banks which had its genesis in the undivided district of Dakshina Kannada are all set to merge.

"Government may call it a merger. six banks which have been built up over the years will disappear from banking scenario", Venkatachalam said as he recalled that when the financial recession was experienced world over in 2008, the domestic banking system was safe because of public sector banks. The government has claimed that there were no retrenchments and better rationalisation of operations through the Bank of Baroda merger. SBI's merger with associate banks was steered by Arundhati Bhattacharya, and that of BoB by PS Jayakumar, both experienced to take over the challenge. Bhattacharya had said earlier that when mergers are being carried out, "it has to be quite deliberate". This means it has to be meticulously planned rather than being forced, without being offered an alternative.

The government also announced a details of the bank recapitalisation road map. It is also unclear as to who will take charge of seeing such mammoth entities through the integration process, given that many of bank chiefs' terms are due to expire over the next few months. This is what all these banks will have to cope with.

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