Bank Merger News:
In a recent meeting held by the finance ministry discussion about the merging of 10 public sector banks has been done. The BJP led National Democratic Alliance (NDA) has given the green signal to this public sector bank merger decision. The official announcement will be made anytime soon. This merger of the public sector banks will have its own advantages and disadvantages. We have to wait for some time to see the effect. The complete details about the bank merger are given here.
- Punjab National Bank, United Bank of India and Oriental Bank of Commerce are going to be merged together.
- Canara Bank and Syndicate Bank will be merged.
- Union Bank of India, Andhra Bank, and Corporation Bank are to be merged together.
- Indian Bank and Allahabad Bank will be merged together.
Three Tier System in Banking Structure:
These announcements are made by the finance minister Nirmala Sitharaman in the meeting. After the merger, Punjab National Bank will be the second-largest public sector bank in India. Also, the Indian Bank will become the seventh-largest public sector bank after its merger with the Allahabad Bank. After the merger, the 27 public sector banks will come down to 12. The 12 public sector banks will come into the three-tier system.
- Tier 1 will have 4 to 5 banks of larger business size. The Punjab National Bank, Indian Bank, SBI, Canara Bank will come into the tier 1. Their business size will be above 10 lakh crore. They will represent a strong national presence and will have a global reach.
- Tier 2 will have the banks with a business size of 5 to 10 lakh crore. Bank of India and the Central Bank of India will come into this category. They will strengthen the national presence further more.
- Tier 3 will have the banks of business size less than 5 lakh crore. Bank of Maharastra, UCO Bank, Indian Overseas Bank, and Punjab & Sind Bank will come here. They are to strengthen the regional focus.
Advantages of the Bank Merger:
The following are the advantages of the public sector bank merger,
- The efficiency of the public sector banks will improve much.
- The capital base of the banks will become larger than before. As a result of which banks can offer larger loans.
- The burden of the central government will be reduced to a greater extent in recapitalizing the banks.
- The gross Non-Performing Asset (NPA) of the public sector banks will decrease further.
- The banks will focus more on technology developments.
- The total inter-bank transactions will come down. As a result of which more time will be saved for the financial transactions.
Disadvantages of the Bank Merger:
- There are chances of Public Sector Banks becoming weak and the encouragement of the private sector banks.
- There will be human resource issues and problems in the career growth of senior management. As a result, this will cause distress among banking employees.
- The characteristics of the smaller banks may lost and their condition may go even worse.
The effects of this public sector bank merger will take some time to reflect. For banking aspirants we have to wait and see whether this will have any effect on the job vacancies and their career aspects.