Major scaling up to reach complementary networks! FinMin announces series of state-run bank mergers
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New Delhi, August 30: In a very recent announcement, this time specifically focussing over the implementation of bank reforms, FinMin Nirmala Sitharaman on Friday said that record levels of loan recovery had been reached due to the reforms implemented by the government.
“In FY19, there was recovery of Rs 1.21 lakh crore compared with Rs 77,000 crore in FY18. Absolute amount of bad loans too have declined by Rs 1 lakh crore to Rs 7.9 lakh crore, according to her presentation. Provision coverage ratio is at a seven year high”, she said while addressing the forum here.
Sitharaman also informed that authorities have been instructed to clear all pending GST refunds within the next 30 days, while asking to release all such refunds within 60 days in future.
Further slating to the evolution of the merger of Dena Bank, Vijaya Bank and Bank of Baroda, she said that the consolidation of the three banks has resulted in good outcomes. “Operations have been rationalised, verticalisation has been initiated and there were no retrenchments after the merger”, adding that the Bank of Baroda has seen robust CASA growth after the merger.
"There is a clear indication of rapid growth and high profitability for BoB after the merger. The government will focus on consolidation to unlock banks’ potential. Big banks with enhanced capacity to increase credit”, she said.
Further announcing a series of mergers, the Ministry of Finance that Punjab National Bank, Oriental Bank of Commerce and United Bank will be brought together, the combined entity of which will become the second largest public sector bank with a business of Rs 17.95 lakh crore.
The second consolidation, she said, will be of Canara Bank and Syndicate Bank. "This merger has large cost-reduction potential due to their network overlap. The merged entity will have a business of Rs 15.2 lakh crore and the third largest branch network of 10,342 branches", she added.
The third merger is of Union Bank, Andhra Bank and Corporation Bank. This will have the fourth largest branch network with 9,609 branches and the fourth merger announced today was that of the Indian Bank and Allahabad Bank.
India will now therefore have 12 public sector banks, being Punjab National Bank, canara Bank, Union Bank of India, Indian Bank, State Bank of India, Bank of Baroda, Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra, and Punjab and Sind Bank.
“Some of the measures announced last week have already been initiated. Eight public sector banks have already announced repo rate-linked loan products. The partial credit guarantee scheme for NBFCs and HFCs has been initiated and sanction of Rs 3,300 crore has been done already”, she said adding to the developments of the last week’s announcements.
In an effort to boost India’s economy from a five-year low, Sitharaman had announced a slew of measures on August 23 including removal of the tax surcharge on foreign portfolio investors, front-loading of the Rs 70,000-crore bank recapitalisation plan and steps to revive the automotive industry.