Mega bank mergers announced
New Delhi: In second set of major policy announcements to address economic concerns, Union Finance minister Nirmala Sitharaman on Friday announced to merge 10 public sector banks into four as part of plans to create fewer and stronger global-sized lenders.
This comes as a mega banking realignment by the Narendra Modi government in order to streamline their operation and size and also to boost economic growth from a five-year low.
The Oriental Bank of Commerce (OBC) and the United Bank of India (UBI) has been merged into the Punjab National Bank (PNB). The PNB will now be the second largest PSU bank after the State Bank of India, which earlier saw a similar consolidation with all associates merging with it.
The Syndicate Bank has been merged with the Canara Bank while the Andhra Bank and Corporation Bank will merged with Union Bank of India.
The Allahabad Bank will merge into the Indian Bank. This will make it the seventh largest state-owned bank in India. With this announcement of merger of banks, the total number of PSU banks will come down to 12. Before 2017, when the government rolled out bank-merger plan, the number of public sector banks in India was 27.
The exercise, seen together with the previous two rounds of bank consolidation, will bring down the number of nationalised public sector banks to 12 from 27 in 2017. This, the government feels, will make bank balance sheet stronger with greater capacity to lend.
The Finance minister also unveiled governance reforms in public sector banks, saying their boards will be given autonomy and enabled to do succession planning.
Also, bank boards will be given flexibility to fix sitting fee of independent directors, she said, adding that non-official directors will perform role analogous to independent directors.
"To make management accountable to board, board committee of nationalised banks to appraise performance of general manager and above including managing director," she said.
Meanwhile, India's growth rate for April-June 2019 slipped to 5 per cent compared to 8 per cent in the corresponding period last year, according to the latest data from the Central Statistic Office (CSO) released on Friday. The growth slowest in 25 quarters is being attributed to a sharp deceleration in the manufacturing sector and sluggish agriculture output.
On August 8, the Reserve Bank of India had pegged the economy to grow in the range of 5.8-6.6 per cent in the first half (April-September), down from its June forecast of 6.4-6.7 per cent.
The government's fiscal deficit touched Rs 5.47 lakh crore in the June quarter, which is 77.8 per cent of the budget estimate for 2019-20.
In absolute terms, the fiscal deficit or gap between expenditure and revenue was Rs 5,47,605 crore at July-end, as per the data released by the Controller General of Accounts (CGA) on Friday.
The fiscal deficit stood at 86.5 per cent of 2018-19 budget estimate in the year-ago period.
The government estimates the fiscal deficit to be at Rs 7.03 lakh crore during 2019-20. It aims to restrict the deficit at 3.4 per cent of the GDP in the current fiscal, same as the last fiscal.
Meanwhile, the Congress hit out at the government, saying the slump in GDP is a "Modi-made disaster" and demanded that a financial emergency be declared in the country. The truth can no longer be hidden despite "headline management" by the ruling dispensation, the Opposition party said.
