Finally, Indian Bank has been merged with Allahabad bank.
Sitharaman, addressing the press conference, said that partial credit guarantee scheme for NBFCs has been executed since the last announcements and Rs 3,300 cr liquidity support has been given, while Rs 30,000 crore is in pipeline. The Punjab National Bank will be merged with Oriental Bank and United Bank to make it the second-largest PSB with Rs 18 lakh crore business and second-largest branch network in India. Ten public sector lenders have been merged to form four banking entities as a result of the mergers.
Loan recoveries have hit a recover level of Rs. 1,21,076 crore, she said, adding that gross non-performing assets or bad loans have come down from 8.65 lakh crores to 7.90 lakh crores, she said.
Finance Secretary Rajiv Kumar said that the effective date of the amalgamation will be decided on the decision of the individual banks, and in consultation with the Reserve Bank of India.
Post consolidation, the number of PSU banks will come down from 27 to 12 and this, according to Sitharaman, was "the right number of PSU banks to have".
According to Fitch, banks would require United States dollars 13-15 billion of capital by FY21 over and above the Rs 70,000 crore that government is pumping into them this year. "Almost 88 per cent of all PSB business will be with these consolidated banks", she said.
"Employees will only benefit with the mergers", he added. Among others, United of Bank of India has a net NPA 8.67 percent as on 31 March, PNB 6.55 percent, Oriental Bank of Commerce 5.93 percent, Canara Bank 5.37 percent, Syndicate 6.16 percent, Union Bank 6.85 percent. While this amount is to be released upfront, she also announced additional lending and liquidity to the tune of Rs 5 lakh crore to PSBs. Similarly, Canara Bank and Syndicate Bank will be merged, Union Bank of India will absorb both Andhra Bank and Corporation Bank.
The FM also announced certain governance reforms.
Sitharaman said that these infusions would be for credit growth and meeting regulatory needs.
Finance Minister Nirmala Sitharaman Friday announced the merging of a number of Public Sector Banks (PSB) in order to revive and revitalise the banking sector with the objective of achieving the $5-trillion economy target. It has allowed them to hire external chief risk officers and to provide them market-linked compensation.
Apart from injecting more funds, the government is also taking steps to strengthen the banks' boards oversight capabilities.