A public sector bank is a bank a financial institution in which a state, municipality, or public sector actors are the owners. It is an enterprise under government control prominent among current public banking models are the bank of North Dakota the German public bank system and many nations postal bank systems.
Oriental Bank of Commerce (OBC) and United Bank of India will be merged into Punjab National Bank (PNB). After the merger, these together will form the second-largest public sector bank in the country.
Syndicate Bank will be merged into Canara Bank, which will make it the fourth-largest public sector lender.
Indian Bank will be merged with Allahabad Bank.
Union Bank of India will be merged with Andhra Bank and Corporation Bank.
Benefits of Bank Mergers in India
The government has stated three broad gains from the merger.
· The first benefit is the enhanced capacity to increase the amount of credit.
· Secondly, they have claimed that the merger will lead to a strong national presence and global reach.
· The third potential gain is the gains in operational efficiency that will reduce the cost of lending.
Merits of Bank Merger in India
· Customers will get to choose from a wide array of products such as mutual funds, insurance, traditional loans, and deposits.
· Recapitalization need from the government will reduce.
· A large capital base would help the acquirer banks to offer a large loan amount.
· Service delivery may improve.
· Technological up-gradation is possible.
Demerits of Bank Merger in India
· The local identity of small banks won’t be notable.
· It will be tough to manage issues related to human resources.
· Few of the larger inter-linked banks can expose the economy to financial risks.
ATM and Local Bank Branches
Customers will be able to use a wider ATM network and branch network. Customers will also receive the liberty to choose from a longer product and services list. After the entire bank merger process is finished, then if there are too many branches of the amalgamated banks in an area, some branches might get closed.
Reason for merger PSB in India
Industry consolidation
Tactical move that enables a company to reposition itself into a stronger operational and competitive industry position.
Defensive move
Attractive tactical move in any economic environment particularly in a cyclical down-turn where a merger can be a strong defensive move.
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