RBI is positive about Bank Merger

The RBI believes India can achieve big and create some better global banking majors if the ongoing mergers of state-owned banks achieve show the desired impact of creating stronger and well-capitalised lenders of global scale.

Currently, In the list of top 50 of the world, India’s Banks are not listed. Since 2008 global financial breakdown, list is purely taken by the chinese banks.

Soon after the merger of its five associates, for a short time, SBI got place in the global top 50 list with a balance-sheet of around $450 billion, but soon was removed as there were the massive pile of bad loans in the system, which affected its balance-sheet.

For recapitalization, the government took this step by announcing merger of 10 PSBs into four.As per the scheme, Oriental Bank of Commerce and United Bank of India will merge with Punjab National Bank which will create the second largest public sector lender after the SBI; Syndicate Bank would merge with Canara Bank; Union Bank would take over Andhra Bank and Corporation Bank; and Allahabad Bank would merge with Indian Bank.

The amalgamations will get completed by Marche 2020, which will make the total banks o 12 which is 19 now and as many as 27 in 2017.

In FY19, the government had merged Vijaya Bank and Dena Bank with Bank of Baroda and in 2017, the State Bank absorbed five of its associates along with the Bharatiya Mahila Bank.

“The merger of PSBs is likely to transform the face of our banking sector with the emergence of stronger, well-capitalised banks aided by cutting-edge technology and state-of-the-art payment systems. Our banks have the potential to become global baking leaders,” the Reserve Bank of India said in its annual report on ‘trends & progress of banking 2018-19’, released on Tuesday.

“Banks are facing increasing challenges from non-traditional players such as fintech and big technology firms which are taking advantage of digital innovation,” the report warned.