Major Banking Merger Reforms announced: The earlier 27 PSBs will now become 12

Citing the recent merger of Bank of Baroda, Vijaya Bank and Dena Bank, she says no one was retrenched, best practices of one adopted for the merged entity. Photo Source : The Print
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Friday (August 30): In order to push the stalled economy, Finance Minister Nirmala Sitharaman today announced bank merger reforms. In a press conference held today, she has also announced measures to reform PSB (Public Sector Banks) boards. Earlier 27 PSBs will now be 12.

Punjab National Bank, Oriental Bank of Commerce, and United Bank will be merged to become the second largest bank in India with business of Rs. 17.95 lakh crore, with PNB as anchor bank.

Furthermore, 1) Canara Banka and Syndicate Bank will be merged and this will be the third largest bank, she said.

2) Union Bank of India, Andhra Bank, Corporation Bank will be merged to become the fifth largest PSB.

3) Indian Bank is being merged with Allahabad Bank. The business size will make it the seventh largest bank.

Moreover, she announced that, Bank of India and Central Bank of India will continue to function as is. Indian Overseas Bank, UCo Bank, Bank of Maharashtra and Punjab and Sindh Bank will continue to function in their regional areas. This means there are 12 PSBs in the country to power the Five trillion economy dream, she added.

Loan recoveries have reached record levels, says Ms. Sitharaman.

She announces measures to reform boards of PSBs :

  1. Boards given flexibility to introduce CGM level as per business heads.
  2. Boards can decide on pay of non-official directors.
  3. Board committee of nationalised banks to appraise performance of GMs and above, including MD.
  4. Boards given residual service to ensure GMs and above are given tenure of at least two years.
  5. Risk Management Committee given mandate to fix accountability for compliance of Risk Appetite Framework.
  6. Boards can recruit Chief Risk Officer, at market-linked compensation.
  7. Executive Director’s strength in larger banks to be raised to four.
  8. MCB loan sanction thresholds enhanced by up to 100%.

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