A government document shared on social media has triggered speculation about possible PSU bank mergers between Union Bank and UCO Bank, and Bank of India and Bank of Maharashtra. The document, whose source couldn’t be verified, said that a Parliamentary committee will hold discussions with four PSU banks in the first week of January under banking laws, which govern mergers and acquisitions, among other things.
However, the government has not yet provided official information regarding the merger. Neither of the four PSU banks mentioned has made any stock exchange filings in this regard.
The document being circulated on X (formerly Twitter) is a government PDF issued in the name of Ramesh Yadav, Under Secretary of the Government of India. The letter is issued to the Governor, Reserve Bank of India, Chairman of LIC, IRDAI, and NABARD, along with MD and CEOs of UCO Bank, Bank of Maharashtra, Bank of India, and Union Bank of India.
The PDF is also addressed to CMDs of New India Assurance Company, United India Insurance Company, Oriental Insurance Company, National Insurance Company, and MD & CEO of SBI Life Insurance Company. The subject of the alleged government PDF states 'Study Visit programme of the Committee on Subordinate Legislation, Lok Sabha to Mumbai and Goa from 2 to 6 January 2024'.
The 2-day programme includes informal discussions with the representatives of Union Bank of India and UCO Bank on January 2, and with representatives of Bank of Maharashtra and Bank of India on January 4, 2024, on rules/regulations framed under the Banking Regulations Act 1949 and other relevant Acts as applicable to them and the regulatory mechanism in post-merger scenario.
The Finance Ministry has reportedly issued a clarification, saying that this is a parliamentary committee on subordinate legislation, and it has no connection whatsoever with the policies of bank mergers, according to CNBC-Awaaz.
Amid the merger buzz, the ministry reportedly changed the agenda of its meeting. According to the new agenda, there is no mention of the word “Merger”, which simply means that there is no proposal for a merger between Union Bank of India and UCO Bank, Bank of India, and Bank of Maharashtra, said CNBC-Awaaz in its report.
Meanwhile, No proposal to merge the public sector banks is being considered by the government and the discussions were part of a ‘routine exercise, Reuters also reported citing two sources from the Ministry of Finance.
Ahead of the merger buzz, shares of UCO Bank on December 15 closed 1.12% higher at Rs 40.70 on the National Stock Exchange. Shares of Union Bank of India closed 3.92% higher at ₹128.50 on the NSE. Meanwhile, Bank of Maharashtra shares ended 1.07% higher at ₹47.25 and Bank of India shares closed 1.25% up at ₹113.00 on the NSE.
PSU Bank mergers
In 2017, the cabinet approved the State Bank of India (SBI) acquiring five of its subsidiary banks. Later in 2019, Finance Minister Nirmala Sitharaman announced that 27 public sector banks existing in 2017 will be reduced to more than half following multiple mergers. In the same year, the cabinet approved the unification of Vijaya Bank, Dena Bank, and Bank of Baroda.
On March 4, 2020, the government greenlit a 'mega consolidation' of PSBs, effective April 1, 2020. This entailed merging the Oriental Bank of Commerce (OBC) 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 merger of six smaller PSBs with the State Bank of India and the merger of Vijaya Bank, and Dena Bank with Bank of Baroda (BoB) has already taken place. Hence, 10 public sector banks have been reduced to two larger ones i.e. the post-merger SBI and post-merger BoB.
The government cited enhanced competitiveness, both domestically and globally, as a key rationale for these mergers. The creation of next-generation banks was imperative for India to become a $5 trillion economy in the next five years, Nirmala Sitharaman said.
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