If Consolidation of banks takes place then banks will have higher asset strength & increase in the capital base. Also, the problem of Non-Performing Assets (NPAs) & other problem like Capital Requirement which are faced by the banks can be resolved to some extent.

The Consolidation in the banking sector can be done on the following lines:

  • SBI, BOI and BOB should be merged to be among the largest banks in the world
  • The second step is the merger of Canara Bank, Indian Bank, BOM, IOB and UBI to form the second largest bank.
  • PNB, Vijaya Bank, Andhra Bank and IDBI can be merged to form the third largest.
  • Allahabad Bank, Central Bank, Corporation Bank and P&S Bank should be the fourth largest.
  • OBC, Syndicate Bank, UCO Bank and Dena Bank can become the fifth largest bank.

Let us take a look at the complete list of the asset & staff strength banks will have after the merger between its associates, given below:

Bank Name

Asset Strength Crore

Staff Strength

Associate Banks

 State Bank of India

 2,60,665

 2,82,915

State Bank of Hyderabad

State Bank of Patiala

State Bank of Travancore

State Bank of Bikaner & Jaipur

State Bank of Mysore

 Punjab National Bank

 14,79,773

 1,52,749

Oriental Bank of Commerce

Allahabad Bank

Corporation Bank

Indian Bank

 

Canara Bank

 

 13,82,690

 1,40,290

Syndicate Bank

Indian Overseas Bank

UCO Bank

 Union Bank of India

 11,79,508

 1,04,790

IDBI Bank

Central Bank of India

Dena Bank

 Bank of India

10,92,530

 94,301

Andhra Bank

Vijaya Bank

Bank of Maharashtra

 Bank of Baroda

 9,37,612

 76,849

Union Bank

Punjab & Sind Bank

Mahila Bank


Advantage of Merger of Smaller Banks

  • Firstly, large banks would have a wider capital base & can offer loan of a larger amount.
  • Public Sector Banks will improve their efficiency and service delivery.
  • The burden on the central government to recapitalize the public sector banks, again and again, will come down.
  • Customers of smaller banks will get access to wider financial instruments like mutual funds and insurance products, available only with Big Banks.
  • Moreover, the volume of inter-bank transactions will come down, resulting in saving of considerable time in clearing and reconciliation of accounts.
  • In the end, from the technology perspective, a larger bank may allow up-gradation of more technology platform.

Disadvantage of Merger of Smaller Banks

  • First of all, smaller banks will lose their local characteristic.
  • There will be some greater financial risks for the broader economy because of a few large inter-linked banks.
  • Also, Human Resource issues will be difficult to manage.
  • Career growth (Promotions) of senior management and other workers could attract problems.
  • It may also create distress within the bank employees.
  • Finally, it will weaken the PSB’s & encourage private sector banking.

Source : https://testbook.com/blog/pnb-and-bank-of-baroda

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