Shares of public sector banks (PSBs) are likely to lead a market rally on Monday after the government announced a mega consolidation plan for public sector banks to boost credit and revive economic growth.
Finance Minister Nirmala Sitharaman on Friday announced the merger of 10 public sector banks into four entities to make them stronger and sustainable as well as increase their lending ability. The Punjab National Bank will be merged with Oriental Bank and United Bank to make it the second-largest PSB with Rs 18 lakh crore business and second-largest branch network in India.
Canara Bank and Syndicate Bank will be consolidated to form the fourth largest public-sector bank with business of Rs 15.2 lakh crore. Union Bank of India, Andhra Bank and Corporation Bank would be merged to make it the fifth largest bank of the country with business of Rs 14.59 lakh crore. Among others, Indian Bank and Allahabad Bank will be merged into one entity, while Bank of India and Central Bank of India would remain independent.
Also Read: Punjab National Bank to be merged with Oriental Bank and United Bank
Following the amalgamation, there will be only 12 PSBs in Indian from 27 earlier. Ahead of the announcement, shares of state-owned banks rallied as much as 16 per cent in intra-day trade on the Bombay Stock Exchange (BSE) on Friday.
Among the public sector banks, Jammu & Kashmir Bank was the top performer, followed by Oriental Bank of Commerce, Andhra Bank, Syndicate Bank, Indian Bank, Central Bank of India and UCO Bank.
Also Read: Union Bank, Andhra Bank, Corporation Bank to merge to become 5th largest bank PSB
Jammu & Kashmir Bank share price gained as much as 16.14 per cent to touch an intra-day high of Rs 42.80 apiece from Thursday's close level of Rs 36.85 in line with benchmark index. Trimming some of early day gains, stock ended trade at Rs 41.55, up 12.75 per cent. The lender's share price has been on a buying spree for the last 5 days, surging 23 per cent during the period.
Oriental Bank of Commerce rose 8.25 per cent to Rs 73.50, while Andhra Bank surged 8.22 per cent to Rs 19.75. Syndicate Bank advanced 6.94 per cent to Rs 32.35 and Indian Bank too gained 4.63 per cent to close at Rs 200.20 on the BSE.
Also Read: Canara Bank, Syndicate Bank to merge to become 4th largest public sector bank
Meanwhile, the S&P BSE Bankex ended 172.11 points, or 0.56 per cent, higher at 30,949.72. The Nifty PSU Bank index closed 1.02 per cent higher at 2,474.40, rebounding nearly 3.5 per cent from day's low after reports of banks merger news.
Last week, the government had announced an immediate release of Rs 70,000 crore to public sector banks and additional lending and liquidity to the tune of Rs 5 lakh crore to PSBs, thereby benefitting corporates, retail borrowers, MSMEs, small traders and others.
Edited by Chitranjan Kumar