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Mergers for 10 public sector banks may be notified by the Government soon

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Mergers for 10 public sector banks may be notified by the Government soon

The Central Government has already executed big-ticket banking mergers successfully including the merger of 5 associates into the State Bank of India (SBI) and also the merger of Dena Bank and Vijaya Bank into the Bank of Baroda (BoB). Mergers are perceived as a handy measure for revitalizing several banking entities and strengthening them while giving them the leverage to clean up balance sheets in a fresh bid at future growth.

The Central Government is expected to officially notify the merger of 10 PSBs (public sector banks) in a bid to establish four large lending institutions. This notification can happen soon as per experts and may be expected sometime within the next 7-10 days itself. The groundwork for these mergers has reportedly been completed by the Government already.

Key aspects worth knowing

Post the notification of the bank mergers, the respective boards of the banks will have to provide a customary approval to finalize the procedure. Additionally, it will be necessary to determine the vital swap ratio for executing these mergers. The Managing Director at United Bank of India, Ashok Kumar Pradhan, has reportedly stated that the Government notification for the merger is expected sometime soon itself.

Banks will however have to abide by the regulatory aspects and other formalities for safeguarding the interests of their minority shareholders. Valuations for every bank proposed for the mergers has been executed, based on the half-yearly results in the present financial year and also upon the basis of future guidance as per reports. The second biggest lending institution in the country will be established with the merger of the Punjab National Bank (PNB) with Oriental Bank of Commerce (OBC) and United Bank of India. Andhra Bank and Corporation Bank will be merged into the Union Bank of India for creating a much stronger banking entity. Syndicate Bank is expected to merge with Canara Bank while Allahabad Bank and Indian Bank will also be merged likewise.

Each bank already possesses its own valuers and work has already been done for harmonizing valuations of merging partner entities. This major merger exercise was officially confirmed by the Government on the 30th of August, 2019.

What else should you know?

PNB, United Bank of India and OBC will be merged for establishing the second biggest lending entity in India with regard to the overall network of branches and size of business. The anchor bank for the merger in this case is Punjab National Bank. All mergers may be held effective from April, 2020, itself. Non-anchor lending institutions in this mega merger process have already asked for new logos and names from the Government, unlike the merger of Bank of Baroda with Vijaya Bank and Dena Bank. In the latter case, logos have been retained for all three lending institutions.

United Bank of India has also reportedly asked the Government for a name that will be upholding the national identity of the bank post the merger. In the future, it will be the brand which will be drawing more people as per UBI’s reasoning. Indian Bank may keep its name post the merger with Allahabad Bank, given the national resonance of the brand name. The same strategy may be followed for the merger led by Union Bank of India.

 

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