Finance Minister announces major mergers and recapitalisations of banks

At 4 pm today, Finance Minister dropped a few crucial announcements. Mrs Nirmala Sithraman announced banks mergers for ten major banks, these include: 

1. Punjab National Bank+ Oriental Bank of Commerce+ Union Bank
2. Union Bank + Andhara Bank+ Canara Bank
3. Allahabad Bank+ Indian Bank
4. Canara Bank+ Syndicated Bank

This move has brought down the number of nationalized banks from 21 to 12. The FinMin in her address to the press stated that this move would help improve governance and help in better capital management. 

Another important announcement was bequeathing approximate estimate for PSU bank recapitalization. Sithraman states that Union Bank of India would be given Rs. 11,700 crore, Bank of Baroda Rs 7,000, Punjab National Bank Rs 10,000 crore, Canara Bank Rs 6,500 crore, Indian Bank Rs 2500, Uco Bank 2,100 crore, ION Rs 3800 and United Bank of India Rs 1,600.  

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She was also quick to announce a string of governance reform for government banks with the hopes that the capital injected by the government into the lenders would result in stronger banks. Being mindful of the plight of the employees of these banks, she stated that none of the employees would be retrenched. The fusion of these banks is strictly intended to provide stronger banks to meet the 5trillion economy target.

While the news of the mergers was received a lukewarm response, some of the pairings are considered unusual given that some banks are predominant in South India and some in North India. There are also questing being raised about whether the banks were consulted for the same.  

The move does not come as a surprise since consolidation among public sector banks had been on the agenda for the National Democratic Alliance government since the year 2014 when it first assumed power. This is the season of fulfilling promises and the BJP led NDA government plans to make good on all of them. 

Only time can stand testimony to the effectiveness of these reforms. For now, what seems inevitable is that the weekly reforms may continue until the economy is resuscitated to full health.