The government on Monday announced its plan to merge three public sector banks (PSBs) to create the third largest lender of the
country, as part of efforts to clean up the country’s banking system.

Announcing the plan, Union finance minister Arun Jaitley said the merger will make the banks stronger and sustainable as well as increase their
lending ability.

Giving the context of the merger, he said bank lending was becoming weak, hurting corporate sector investments.

Also, many banks were in a fragile condition due to excessive lending and ballooning NPAs, he said.

“This amalgamated entity will increase banking operations,” he said.

“No employee will face any service conditions which are adverse in nature. The best of the service conditions will apply to all of them,” Jaitley added.

Jaitley said that the amalgamation process “will increase the banking operations.” The board of the banks will meet to chart out a proper roadmap and consider the process, the finance minister added.

Financial services secretary Rajiv Kumar said bank boards of the three banks will examine the amalgamation proposal. “The merger will help improve operational efficiency and customer services.”

The amalgamated bank would be the third largest bank in India and will be strong competitive lender with economies of scale, he said, adding the three would have synergies for network, low-cost deposits and subsidiaries.

The government will continue to provide capital support to the merged bank, Kumar added.

The government owns majority stakes in 21 lenders, which account for more than two-thirds of banking assets in Asia’s thirdbiggest
economy.

The proposed merger follows a similar move by the government in February last year when it merged State Bank of India (SBI) with its five subsidiary banks, helping the country’s largest lender by assets increase its scale and cut expenses through synergies.

Source : Click Here