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HomeEconomyNo more bank mergers in Modi govt’s current tenure

No more bank mergers in Modi govt’s current tenure

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Even the merger of Bank of Baroda, Dena Bank and Vijaya Bank, announced in September, will only be completed by June 2019, a senior govt official said.

New Delhi: The next round of consolidation among state-run banks is unlikely to happen in the Narendra Modi government’s current tenure, extending India’s wait to have a few big banks that are globally competitive.

Successive governments have struggled to consolidate state-run banks — a politically sensitive move in the face of opposition from employees and bank unions. The alignment of human resources, information technology systems and the branch network are the other challenges for policy-makers while contemplating bank mergers.

At present, among state-run banks, State Bank of India is the only lender to figure in the top 50 banks in the world, after its subsidiaries merged with it. In 2016, the government announced the merger of five subsidiaries — State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore — and Bharatiya Mahila Bank Ltd with SBI. The merger was completed in 2017.


Also read: Indian Overseas Bank & Andhra Bank among 8 identified for merger by Modi govt


No time left

“There is not enough time left for more mergers since general elections will take place in April-May 2019. The completion of the one between Bank of Baroda, Dena Bank and Vijaya Bank will happen only by June,” a senior government official said.

The official also cited the long time taken by the central bank to give approvals to the merger of these three banks, and the recent acquisition of a majority stake in IDBI Bank by the Life Insurance Corporation of India, to rule out further consolidation.

The merger of Bank of Baroda, Dena Bank and Vijaya Bank was a surprise announcement on the Prime Minister’s birthday, 19 September. However, the RBI approved the merger only recently.

Similarly, though LIC’s proposal for acquiring a majority stake in IDBI was approved by the boards in early September, the final approval by the central bank came only in November.

Opposition from employees, PNB hesitant

The opposition by bank unions is another factor that has weighed in the government’s decision-making. The All India Bank Employees Association has called for a nationwide strike on 26 December, opposing the three-bank merger.

After this round of mergers, the government was expected to consolidate some other banks, with relatively weaker banks merging with stronger banks like Canara Bank and Punjab National Bank.

However, Punjab National Bank has informed the government that it is not prepared to be a part of the consolidation process. The bank wants to consolidate and strengthen its operations internally after its balance sheet was hit by the massive Rs 14,000 crore scam allegedly perpetrated by jewellers Nirav Modi and Mehul Choksi.

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