We recently brought you news about the first Public Sector Bank (PSB) consolidation of Vijaya Bank and Dena Bank with Bank of Baroda, effective on April 1, 2019, anticipating that there will allegedly be more mergers this year. Straying on this avenue, there could be another round of consolidation, this time Punjab National Bank (PNB) acquiring three small state-run banks: Oriental bank of Commerce (OBC), Allahabad Bank and Andhra Bank.
A Little Intro
To brief you a bit on all this hustle about PSB consolidations, India has been trying to consolidate its banking sector by merging smaller regional public-sector banks with larger government-owned banks so that bad loans and operating costs can be cut down. Also, having lesser number of major government banks can tap into savings elsewhere and streamline operations, big time.
There has recently been a merger of Bank of Baroda with Dena Bank and Vijaya Bank, which has secured the merger the 2nd largest lender after SBI.
The 2nd Merger You’ve Got to Know
In further consolidation of the PSBs, Punjab National Bank (PNB) could take control of two to three small state-run banks that could include Oriental Bank Of Commerce, Andhra Bank and Allahabad Bank, by net three months. The government has been striving to leverage the health of public sector banks in India and the best way it sees to accomplish this, is by merging heavily-loaned smaller state-run banks with large banks.
There are possible talks of consolidation of PNB with Union Bank of India and Bank of India, as well. In February, the government announced a recapitalization tranche of Rs 48,239 crore for 12 PSBs to take them out of RBI’s Prompt Corrective Action (PCA) framework. Their lending ability was constrained by RBI when they were put under this framework.
These 12 banks include:
- Allahabad Bank,
- Corporation Bank of India,
- Bank of India,
- Bank of Maharashtra,
- Punjab National Bank,
- Union Bank of India,
- Andhra Bank,
- Syndicate Bank,
- Central Bank of India,
- United Bank of India,
- UCO Bank and
- Indian Overseas Bank.
Just last year, government organized the takeover of IDBI Bank by insurance major, Life Insurance Corporation of India so that the highest levels of bad loans could be well capitalised.
PNB’s shares fell as much as 4%, ending at 2.55% at ?86.10 on NSE on Tuesday. Allahabad Bank fell 2.6% to close at ?45.15 a share, while Oriental Bank of Commerce ended down nearly 1% at ?95.20 per share.