Modi creates banking behemoths to boost India's flagging economy

Finance Minister Nirmala Sitharaman

Finance Minister Nirmala Sitharaman

The Finance Minister said, after today's announcement about the merger of banks, the country will now have 12 public sector banks instead of 27.

For example, with Maharashtra Assembly elections scheduled to take place in October, Bank of Maharashtra (BoM) may have been left out of the scheme of things vis-a-vis amalgamation.

Earlier, five associate banks and Bharatiya Mahila Bank were merged with State Bank of India under Modi 1.0 regime. SLBC is a consultative and co-ordination body of all financial institutions operating in each state.

Among the other mergers, Canara Bank and Syndicate Bank will be combined to form the fourth-largest PSB, with a business of Rs 15.20 lakh crore.

So, what do the mergers mean for the bank customers? In deciding on the combinations for final mergers, the government has picked some of the larger and relatively stronger banks to be the "acquirer banks".

Reforms will fundamentally reboot Public Sector Banks (PSBs) functioning.

Addressing a press conference at a city hotel here on Thursday evening, Sitharaman said even though India is a fast-growing economy in the world, the government recently announced a few measures after the industries expressed fear and apprehension about problems in the present economy. The south based banks are Canara, Syndicate, Andhra, Indian and Corporation Bank.

Together, Punjab National Bank, Oriental Bank of Commerce and United Bank merger shall form the second largest public sector bank with the business of Rs 17.95 Lakh Crore, Sitharaman added.

India's economic growth slowed for the fifth straight quarter in the April-to-June period to 5.0 per cent, government figures showed on Friday in a fresh blow to Prime Minister Narendra Modi. She said, eight PSU banks have launched repo-linked loans in last one week. The government plans to do such to limit the number of state-run banks to 5-6 in the country, the report added.

The combined entities will control 82 per cent of all public sector banks and 56 per cent of all commercial bank businesses. "Rs 55,250 crore capital for credit growth and regulatory compliance to support the economy", she said.

The move comes just a year after the government undertook a pilot-of-sorts, merging three banks - Bank of Baroda, Vijaya Bank and Dena Bank.

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