Fears of slowing credit flow, change in DNA of the organisation are real concerns to cope with
India’s finance minister Nirmala Sitharaman on Friday announced a mega-bank merger plan which, if successful, will see the number of government-owned banks to more than halve to 12 from the current 27.
Several of these banks have, over the past six years, been hurt by rising bad loans and dwindling capital, which has crippled their ability to lend faster. The government said the move for the merger is an effort to create stronger and robust banks as India takes steps to become a $5 trillion economy in the next decade.
The move came on the same day that India recorded its slowest GDP growth in six years, for the June-ended quarter.
There will now be four large banks created out of ten public sector banks: Oriental Bank and United Bank is to merge with the Nirav Modi-fraud hit Punjab National Bank; Canara Bank is to merge with Syndicate Bank; Union Bank of India, Andhra Bank and Corporate Bank to merge, while the fourth will be Indian Bank merging with Allahabad Bank.
All the mergers are pending approval from the boards of each of these banks. Timelines for the mergers also need to be outlined.