While kick-starting a major policy change India’s finance minister Nirmala Sitharaman on Friday announced a mega-bank merger plan. If it's materialising successfully, the nation will see the number of government-owned banks to little more than halve or to 12 from the current 27. Most of these banks have financial crunches with bad loans and dwindling capital which just several of these banks have been hurt by rising bad loans and dwindling capital over the past six years which has downsized their ability.
The sources of the government said the decision for the merger is an endeavour to create gigantic and robust banks as India gears up to become a $5 trillion economy in the days to come. This came to the limelight the day India recorded its slowest GDP growth in six years, for the quarter in June.
There'll now be four large banks set up out of ten public sector banks: Oriental Bank and United Bank is to merge with the Nirav Modi-fraud hit Punjab National Bank; Canara Bank is to merge with Syndicate Bank; Union Bank of India, Andhra Bank and Corporate Bank to merge, and the fourth will be Indian Bank merging with Allahabad Bank. All the mergers are pending approval from the boards of each of these banks.