While discussions are on regarding the convenience and challenges to the merger of 10 PSU banks, India's Finance Minister Nirmala Sitharaman has put speculations to rest that the merger might be put off beyond the intended date of April 1.
Speaking about the merger of 10 PSBs, Sitharaman said: "I don't see any reason to go back or any reason which is particularly causing any delay for any notification... You will hear it as it comes."
Addressing the launch of EASE 3.0 reform agenda, the Finance Minister clarified that the existing loans taken by SMEs and entrepreneurs from the merged banks will be restructured to reduce confusion and simplify payment terms.
Mega-merger of 10 PSBs on schedule
Sitharaman said at a press briefing yesterday, "There are no uncertainties about bank mergers. I am also conscious about the extra work related to core banking... I have asked bankers to do (it). But on merger, we are going as per the schedule. There are no uncertainties and I am on course. There needn't be any speculation."
The mega-merger will witness 10 PSU banks reduced to just 4 and hundreds of bank branches will be closed down, or merged as part of this process. The merger will see Punjab National Bank merging with the United Bank of India, and Oriental Bank of Commerce to create the country's largest state-run bank after SBI, with a total business of close to Rs 18 lakh crore.
The Syndicate Bank will merge with Canara Bank. Union Bank, Andhra Bank and Corporation Bank will be merged to emerge as the fifth-largest state-run bank. Also, the Indian Bank and Allahabad Bank will merge to create the 7th biggest PSB. It is important to note that the merger of Vijaya Bank and Dena Bank with the Bank of Baroda is still incomplete, even after 10 months of approval.
Sitharaman did not mention the need for any additional funds to execute the merger, but stated "a lot of core banking work needs to be done before April 1."
What will be the benefits of the mega-merger, PMO asks
Another angle emerged during a recent meeting of the PMO with the finance ministry officials, wherein PMO sought details on the benefits post the mega-merger of 10 PSBs.
The PMO office has asked banks to provide in-depth details about NPAs, capital requirement, plans on raising capital through the equity and bond markets, credit growth and cost savings related to the merger, and how it will benefit the government in the longer run. Besides, the banks have also been asked to furnish financial projections for the next three years based on the merger.
A senior finance ministry official said on the condition of anonymity that, the government may go for shorter timelines in terms of receiving public grievances on the swap ratio of banks. The process of finalising the swap ratio in the case of Bank of Baroda for the integration of market stocks took 49 days after the government's notification was out.
Meanwhile, the banks have already finalised the swap ratio for the merger of the market stocks. Prime Minister Narendra Modi wants to see the outcome of the amalgamation of Bank of Baroda (BoB) before taking a final call on the merger of the 10 PSBs.