There is no proposal under consideration for merger of Public Sector Banks, Finance Ministry informed the Rajya Sabha on Tuesday while acknowledging that mergers in recent past have given very good results.
As on date, there are 12 public sector banks while the number was 27 till 2017. Earlier, with effect from April 1, 2020, the mega consolidation of ten PSBs took place which includes amalgamation of Oriental Bank of Commerce and United Bank of India into Punjab National Bank, Syndicate Bank into Canara Bank, Andhra Bank and Corporation Bank into Union Bank of India and amalgamation of Allahabad Bank into Indian Bank.
On Tuesday, when asked whether the merger of public sector banks is being considered, Minister of State in the Finance Ministry Pankaj Chaudhry said in a written response: ‘No.’ He, however, said that mergers in recent past have helped in improved synergies, economies of scale, better technology integration and also resulted in uniform improvement across all key financial parameters.
Further, he said several steps have been taken by the government to strengthen the financial condition of public sector banks (PSBs). Chaudhary said the reforms undertaken by the government in the banking sector have created systemic improvements and instituted checks and controls to minimise the risk of recurrence of excessive stress.
For example, as per inputs from Reserve Bank of India (RBI), comparison of pre-merger consolidated figures of banks merged (adjusted for pre-merger position) with that of the anchor bank showed Punjab National Bank reported an improvement in CRAR (Capital to Risk Assets Ratio) to 16.4 per cent from 12.7 per cent, CET1 (Common Equity Tier 1) Capital ratio to 11.6 per cent from 9.6 per cent, GNPA (Gross Non Performing ratio) to 4.5 per cent from 1.8 per cent and Return on Assets (RoA) to around 1 per cent from negative 0.7 per cent.
The consolidation of PSBs played a crucial role in facilitating geographical diversification, penetrating new markets, and extending customer base. The consolidation has enhanced the ability of PSBs to reach out to untapped markets that were previously inaccessible,” he said.
Through a wider network of banking outlets, PSBs now cater to a larger customer base in remote areas where financial services were scarce. This not only promotes financial inclusion but also stimulates economic growth in these regions, he added.