New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi has approved the mega consolidation of ten public sector banks (PSBs) into four 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 Allahabad Bank into Indian Bank.
The amalgamation would be effective from 1 April and would result in the creation of seven large PSBs with scale and national reach with each amalgamated entity having a business of over Rs 8 lakh crore. The mega consolidation would help create banks with a scale comparable to global banks and capable of competing effectively in India and globally. Greater scale and synergy through consolidation would lead to cost benefits which should enable the PSBs to enhance their competitiveness and positively impact the Indian banking system.
In addition, consolidation would also provide impetus to amalgamated entities by increasing their ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity. The adoption of best practices across amalgamating entities would enable the banks to improve their cost efficiency and risk management, and also boost the goal of financial inclusion through wider reach.
Further, with the adoption of technologies across the amalgamating banks, access to a wider talent pool, and a larger database, PSBs would be in a position to gain competitive advantage by leveraging analytics in a rapidly digitalising banking landscape.
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