Banking

Bank Merger Latest News

Six months after announcing its plan to merge 10 public sector banks (PSBs) into four, the Union government is now treading cautiously even though the deadline to merge the balance sheets of these lenders is just one and a half months away.

A senior government official said Prime Minister Narendra Modi wanted to see the “outcome of the amalgamation of Bank of Baroda (BoB)” before taking a final call on the merger of the 10 PSBs. “He wants to review the outcome of the BoB merger and know in detail what benefits it has entailed. This is the latest position on the merger,” the official said, requesting anonymity.

The government’s notification related to the amalgamation scheme has been delayed, sparking concern among the bank boards about a possible delay in the merger process, which was supposed to take place by April 1, 2020 — the beginning of the next financial year.

The finance ministry is likely to give a presentation to the Prime Minister soon before a final decision is taken.

The latest financial results of BoB came as a cause of concern for the government. The bank posted a net loss of Rs 1,407 crore in the third quarter, mainly because of higher provisioning. The bank’s fresh slippages rose to around Rs 10,387 crore — the amount of loans which turned from good to bad.

The fact that the Union Cabinet didn’t approve the scheme of amalgamation in the two meetings held earlier this month has come as cause of concern for top bankers involved in the merger process. They feel they would be racing against time to meet the April 1 deadline for the integration of balance sheets and market stocks.

On August 30 last year, Finance Minister Nirmala Sitharaman had announced the biggest merger exercise of PSBs. Punjab National Bank, Oriental Bank of Commerce, and United Bank of India were supposed to combine to form the nation’s second-largest lender. Canara Bank was to take over Syndicate Bank; Union Bank of India is planned to be amalgamated with Andhra Bank and Corporation Bank; and Indian Bank was to be merged with Allahabad Bank.

The government took the decision after testing waters with the amalgamation of Dena Bank and Vijaya Bank into Bank of Baroda, which came into effect on April 1, 2019. The decision to merge the three state-owned banks was announced in September 2018 and the government had moved timely with the process, issuing a notification for the merger scheme on January 2, 2019. The bank boards had met the same day to announce the swap ratio for shareholders of Vijaya Bank and Dena Bank.
However, in the case of the 10 PSBs, the Union Cabinet is yet to approve the amalgamation scheme. “After the notification, it will ideally take 40-45 days for the banks to complete the due processes. Given that the government is yet to issue the notification for the merger, April 1 looks like a tight deadline,” said the managing director and chief executive officer of a PSB, which is going through the amalgamation process. According to the procedure, the government has to place the scheme of amalgamation for 40 days in Parliament.

After the notification is out, the boards of banks meet to approve the swap ratio immediately and set up an independent committee to address the grievances of minority shareholders. The committee then submits its recommendations to the boards, following which the banks announce the final swap ratio. In the case of BoB, this process took 49 days. Top executives of the banks in the merger process said swap ratios hadn’t been finalised yet and would only happen after the government’s notification was in place.

The government is closely looking at the progress of the BoB amalgamation which itself is moving ahead at a slower speed than anticipated. For instance, the technological integration is not yet complete even after one-and-a-half years of the announcement of amalgamation.

So these things indicates that it will take more than 1 year to make the merger process smooth and robust.So this is all about Bank Merger Latest News.Follow us for all the latest details