Bank Mega Merger: India’s banking sector is about to undergo a major transformation. The central government is now taking steps to merge smaller public sector banks to create larger and stronger ones. Finance Minister Nirmala Sitharaman recently indicated that India needs a “world-class banking system” that can compete internationally. To this end, discussions are underway between the government and the Reserve Bank of India (RBI) on a mega merger plan for public sector banks.
Only four public sector banks will remain in the country
Currently, there are 12 public sector banks in India, but the government plans to reduce their number to just four. Under this plan, State Bank of India (SBI), Punjab National Bank (PNB), Canara Bank, and Bank of Baroda will be retained as the country’s major public sector banks. The remaining banks may be merged with these larger banks to strengthen and integrate the banking structure.
Which banks could be merged?
According to media reports, smaller public sector banks such as Indian Overseas Bank (IOB), Central Bank of India (CBI), Bank of Maharashtra (BOM), Bank of India (BOI), UCO Bank, and Punjab & Sind Bank could be merged with these four major banks. Furthermore, a plan is being considered to merge Union Bank of India and Indian Bank to create the country’s second-largest bank. Currently, it has not been decided which bank will merge with which. The government is considering implementing this entire merger process smoothly to minimize the impact on customers and employees.
Impact on employees and customers
The bank merger will directly impact approximately 2.3 lakh employees and millions of account holders. The government says no one will lose their jobs, but the restructuring of branches may lead to the closure of several branches. This could increase employee transfers, promotions, and workplace-related problems.
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Account holders may also experience some changes. New passbooks, checkbooks, and account numbers may be issued following the merger. However, there will be no impact on bank deposits, fixed deposits, interest rates, or loan terms. Customers may need to visit the bank due to the change in the bank name and branch address.
Why is this step necessary?
The government believes that merging smaller banks will improve capital management, enhance credit delivery capacity, and provide stability to the banking system. This will increase the size of the banks, enabling them to compete with international financial institutions. Additionally, operating costs will be reduced, and technological improvements can be implemented more quickly.