banner articles


  Jun 11, 2020


Government announced consolidation of state­ owned banks that will see 10 banks being merged to form four bigger lenders to strengthen a sector struggling with a bad­ loans and aimed at creating lenders of global scale that can support the economy’s surge to $5 trillion by 2024. After the mergers, the country will have 12 public sector banks.

Which banks do the mergers include?

  1. Punjab National Bank, Oriental Bank of Commerce and United Bank of India will combine to form the nation’s second-largest lender.
  2. Canara Bank and Syndicate Bank will merge.
  3. Union Bank of India will amalgamate with Andhra Bank and Corporation Bank.
  4. Indian Bank will merge with Allahabad Bank.

Who does it benefit and how?

For banks-

  • Opportunity for small banks to gear up to the International level with innovative products and services
  • Can expand their coverage
  • Consolidation helps improve standards
  • Ends unhealthy competition among public sector banks 
  • In the global market, Indian banks will gain recognition and higher ratings
  • Reduction in interference by board members

For economy

  • Reduction in the cost of business
  • Technical inefficiency reduces.
  • The size of each business entity after merger is expected to add strength to the Indian Banking System in general and Public Sector Banks in particular.
  • After merger, Indian Banks can manage their liquidity – short as well as long term.
  • Synergy of operations and scale of economy in the new entity gives greater profits.
  • Many posts of CMD, ED, GM and Zonal Managers will be abolished, saving money.
  • Customers will have access to fewer banks offering them wider range of products at a lower cost.

For government:

  • The burden on the central government to recapitalize the public sector banks will lessen.
  • From regulatory perspective, monitoring and control of less number of banks will be easier.

Downside of mergers -

  • Problems to adjust top leadership in institutions and unions.
  • Mergers will result in shifting/closure of many ATMs, Branches and controlling offices, as it is not economical 
  • Will result in immediate job losses due to many people taking VRS on one side and slow down further recruitment on the other.
  • Clash of different organizational cultures and create conflict.
  • When a big bank crumbles, the entire banking industry will face a big hit and face repercussions.