Modi creates banking behemoths to boost India's flagging economy

Rajiv Kumar appointed as new Finance Secretary

The exercise, seen together with the previous two rounds of bank consolidation, will bring down the number of nationalised public sector banks to 12 from 27 in 2017.

Besides, Bank of Baroda will get Rs 7,000 crore, Indian Overseas Bank Rs 3,800 crore and Central Bank of India Rs 3,300 crore.

"Banks with strong national presence and global reach is what we want".

According to these, Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will be merged with their larger peer Punjab National Bank (PNB).

On Friday, Union Finance Minister Nirmala Sitharaman addressed the media on the economy and announced a slew of measures to strengthen the banking sector. The PJ Nayak committee had in 2014 recommended mergers of some of the banks along with greater freedom/power to the boards to take decisions on various matters of strategic significance.

Business may also be disrupted by strikes threatened by the banks' employee unions, who fear that the consolidation will result in fewer branches and job opportunities. The Syndicate-Canara merger will create the fourth largest PSB, with a Rs 15.20 lakh crore business and 10,324 branches. Union Bank of India MD Rajkiran Rai said, "We don't foresee any problem with regard to merger". The government also vowed to infuse Rs. 55,250 crore as an upfront capital in the Public sector banks.

Six banks have been left untouched.

The PSU recapitalisation comes at a time when the country's GDP growth slowed to 5 percent, signalling the economy has not yet entered the recovery path.

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Punjab National Bank (PNB) will soon hold a board meeting to consider its amalgamation with Oriental Bank of Commerce and United Bank of India. The cleaning up exercise undertaken by him has now started showing the result with 14 banks out of 18 posting profit in the first quarter of the current fiscal.

Finance Minister said that in place of a fragmented lending capacity with 27 PSBs in 2017, there will be only 12 state-run banks.

A major decision to amalgamate 10 public sector banks into 4 banks was taken up.

VK Vijayakumar, the chief investment strategist at Geojit Financial Services, said the continuation of the slowdown in GDP growth was expected but the 5 percent growth in Q1 is worse than expected led by the decline in industrial production, the slump in auto space. "Twelve solidly present, well-consolidated, energised, adequately capital endowed banks will now operate".

The Indian government has made a decision to merge 10 state-owned banks into four, a move that has been cheered by many market participants. The merger of associate banks with the State Bank of India and that of Vijaya Bank and Dena Bank with the Bank of Baroda had failed.

The Union Minister for Finance and Corporate Affairs, Smt.

However, despite these moves, the country's largest lender, the State Bank of India, may emerge as a big victor.

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