Govt not considering merger of public sector banks, says minister in Rajya Sabha

The government is not considering the merger of public sector banks, Minister of State for Finance Pankaj Chaudhary said in a written reply to the Rajya Sabha on Tuesday. The government had last consolidated 10 banks into four in 2019.

Effective Apr 1, 2020, Oriental Bank of Commerce and United Bank of India were merged into Punjab National Bank, Andhra Bank and Corporation Bank were merged into Union Bank of India, Syndicate Bank was merged with Canara Bank, and Allahabad Bank was merged into Indian Bank. Vijaya Bank and Dena Bank were also merged with Bank of Baroda in 2019.

Chaudhary said that the merger of these banks has helped in improved synergies, economies of scale, better technology integration. The mergers have also resulted in “uniform improvement” across all key financial parameters, he added.

Citing data from the Reserve Bank of India, Chaudhary said that key metrics of the four anchor banks have improved as of September 30, compared with the pre-merger consolidated figures of the banks merged. Punjab National Bank's capital to risk-weighted assets ratio had improved to 16.36 per cent from 12.67 per cent and common equity tier-1 capital ratio rose to 11.59 per cent as at September end from 9.55 per cent before the merger. The gross non-performing assets ratio of Punjab National Bank also improved to 4.48 per cent as of September 30 from 13.79 per cent before the merger. 

Similarly, Bank of Baroda, Canara Bank, Union Bank of India, and Indian Bank all reported better capital to risk-weighted assets ratio, common equity tier 1, and gross non-performing assets ratios.

“The consolidation of (PSBs) public sector banks played a crucial role in facilitating geographical diversification, penetrating new markets, and extending customer base,” Chaudhary said. “Through a wider network of banking outlets, public sector banks now cater to a larger customer base in remote areas where financial services were scarce. This not only promotes financial inclusion but also stimulates economic growth in these region,” he said.