In a move that could pave the way for mergers in the public-sector banks (PSB) space, the government has asked banks to share the benefits of mergers that have happened till date. “The government has sought data on internal assessment by banks regarding impact of amalgamation on various stakeholders that includes employees, customers and operational efficiency,” Sunil Mehta, chief executive of Indian Banks’ Association, who was earlier chairman of Punjab National Bank, told The Indian Express. “The process of amalgamation of banks is over and now is the time to reap benefits from this. The benefits can be huge in terms of rationalising the number of branches and using IT for Digital banking — all this will ultimately lead to reduction in cost of operations and add to profitability and customer convenience,” Mehta added. Banks are most likely to provide data on it this week and the move may pave the way for further consolidation of banks in the country, hinted sources in the know. “The government’s strategy on banks is two-pronged — one is to privatise banks and the other is to merge banks to make them financially stronger. This move could be a signal towards more consolidation in the banking space,” said a source on a condition of anonymity. As part of its strategy to make banks bigger and financially stronger, the government in 2019, announced a merger of 10 public sector banks to four — the number of PSU banks have been reduced from 27 to 12. As part of the merger, Corporation Bank and Andhra Banks were merged with Union Bank of India, Syndicate Bank was merged with Canara Bank, Oriental Bank of Commerce and United Bank of India were merged with Punjab National Bank and Allahabad Bank was merged with Indian Bank. These mergers became operational from April 2020 after the merger of Dena Bank and Vijaya Bank with Bank of Baroda and of associate banks with State Bank of India. The consolidation strategy of the government is with an aim to make bigger banks that can compete with not just Indian private banks but also banks globally. Post the mergers till date, SBI has the highest market share among all banks at 22 per cent and PNB’s — second largest public-sector bank — market share is about 8 per cent. As part of its privatisation strategy, the government is looking to privatise two banks that include Mumbai-headquartered Central Bank of India and Bank of India that have not been merged with any bank yet.
