Bank Merger: An initiative to a stronger economy

During the past few years we have been seeing some significant changes in all facets of governmental functioning. The recent claim by our Finance minister Miss. Nirmala Sitharaman of merging ten leading banks into four came as a shock for many critics. In this blog I would like to throw some insights into how this “Mega Merger” will turn out to be a game changer for the Indian Economy.

The recent announcement has been a major step in making India a 5 trillion USD, economy that we usually see our prime minister taking pledge for. After the merger India will have 12 PSU banks which will enhance country’s economy. 10 public sector banks have been reduced to 4, Canara Bank and Syndicate Bank merger; Indian Bank and Allahabad Bank merger; Union Bank of India, Andhra Bank and Corporation Bank merger; and merger of Punjab National Bank, Oriental Bank of Commerce and United Bank of India. The cabinet has also announced to infuse 55,000 crore recapitalization plan to stabilize the process. 

The advantages that mergers offer is that it will create enhanced global presence for banks and will bring down cost on the banking operations. Better NPA and risk management will be obtained coupled with professional standards. Decision on high lending capacity will be prompt with improved customer base and market share. The initiative will help geographically concentrated banks to expand and gradually have higher national recognition and ratings. The renowned rating agency Moody affirmed stable outlook for various banks including Canara Bank, Syndicate Bank, Oriental Bank of Commerce. For Punjab National Bank the agency postulated positive outlook. 

Government has introduced this merger to have a stronger economy in the long term. Unfortunately the move has been facing back lash from bank unions. It is crucial to have an environment of trust and growth oriented agreement among the merging organizations. There is an urgent need to introduce reforms to have structural changes which will move the economy forward. 

Shalini Singh

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