Finance Minister Nirmala Sitharaman announced that the Union Cabinet was approved the merger of 10 public sector banks including Allahabad Bank, Andhra Bank, and OBC into four bigger and stronger banks effective from 01 April 2020. Following the consolidation, there will be seven large public sector banks (PSBs), and five smaller ones.

Reserve Bank of India said Oriental Bank of Commerce and United Bank of India will merge into Punjab National Bank, Allahabad Bank into Indian Bank, Andhra Bank and Corporation Bank into Union Bank of India Starting from 1st April. And, all branches of Syndicate Bank will function as branches of Canara Bank from the next month. 

Punjab National Bank, the anchor bank will become the country’s second-largest bank, with business size of Rs 17.94 lakh crore, after SBI which has the business of over Rs 52 lakh crore and Bank of Baroda will become the third-largest bank, followed by Canara Bank, Union Bank of India, Bank of India, and Indian Bank.

The merger of Oriental Bank of Commerce and United Bank of India into Punjab National Bank Scheme, dated March 4, 2020, issued by the Government of India was published under Extraordinary Part II-Section 3-Sub-section (i) in the Gazette of India sanctioning the merger of Oriental Bank of Commerce and United Bank of India into Punjab National Bank in terms of section 9 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

Sitharaman pointed out the operating profit of the resulting lender has improved and retail loans are now sanctioned in 11 days (average) from 23 days earlier after Dena Bank and Vijaya Bank were merged with Bank of Baroda.

Sitharaman said the mega consolidation would provide a lot of benefits to the merger banks and the benefits as follows:

• It will result in the creation of seven large PSBs with scale and national reach, with each merger bank having a business of over Rs 8 lakh crore.
• The consolidation would help banks to create scale comparable to global banks and capable of competing effectively in India and globally.
• Greater Scale and synergy would lead to cost benefits and that should enable the PSBs to increase their competitiveness and positively impact the Indian banking system.
• The merger plan would provide strength to merged organizations by increasing their ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity.
• Adoption of best practices would enable the banks to improve their cost efficiency and risk management and boost the goal of financial inclusion through wider reach.