BANK MERGERS

The Government has merged Ten Public Sector Banks into four entities.  However, the core problems are said to be remaining.

  1. The Government has said that in order to strengthen the national presence of two and form regional focussed banks, an initiative to merge the banks has been initiated.
  2. The Government has planned to aim at a $ 5 trillion economy, with the new formation of dozen large, national and regional banks brought out through the merger of State Bank of India and its subsidiaries and also the merger of Vijay Bank, Dena Bank and Bank of Baroda.
  3. It is also believed that the bigger banks possess the capability to absorb shock, reap economies of scale and pave way for greater resources without an impact on the exchequer.
  4. The broad advantages of mergers are:
    1. An increased capacity to lend
    2. Stronger national presence and global reach
    3. Operational efficiency which would lead to lending at a lower cost.

Will this be sufficient?

It must be understood that size alone would not guarantee any positive result

State Bank of India, India’s largest bank does not find a place in top performers.

The stronger entity viz Punjab National Bank will be weakened through the mergers the two weak entities viz  United Bank of India and Oriental Bank of Commerce.

The PSB model of banking defines the Government ownership, control and lending support to Government Agenda like Priority Sector, Mudra Loan and Financial inclusion which is a big barricade for bringing out a change in their system of functioning.

 

Conclusion:

Experts feel that the merger does not address the core structural and fundamental issues daunting the PSBs.

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Author: Admin Bankedge

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