Prior to this, the government had merged five associate banks of SBI and Bharatiya Mahila Bank with State Bank of India.
Union Bank, Andhra Bank and Corporation Bank will be merged: Apart from the above, Sitharaman said that Union Bank, Andhra Bank and Corporation Bank will be merged to create India's 5th largest entity, while Canara Bank will be merged with Syndicate Bank to form 4th largest government bank. Moreover, this decision comes in the backdrop of the BJP trying hard to make inroads into the State. She introduced the mergers of many public sector banks into what she referred to as a "consolidated banks".
However, merger-related issues including human resources and technology concerns, branch rationalization, and realigning non-performing assets may impact banks' interim profitability, she added.
"In place of fragmented lending capacity with 27 public sector banks in 2017, now there will be 12 public sector banks post the latest round of consolidation of PSU banks". The government will increase the spend on infrastructure as this is a priority sector, she said.
In a major announcement, Sitharaman unveiled the merger of several banks. She said that Punjab National Bank, Oriental Bank of Commerce and United Bank will marge to acquire one unified identity. "Canara Bank will be merged with Syndicate Bank".
India's economic growth slowed for the fifth straight quarter in the April-to-June period to 5.0 per cent, government figures showed on Friday in a fresh blow to Prime Minister Narendra Modi. It will become the fourth largest PSB in the country.
Professionally managed banks Sitharaman also promised to ensure that these merged banks will be run professionally while shedding some of bureaucratic pains that have dogged public sector institutions.
"It [the merged entity] will have a business of Rs 17.95 lakh crore (1.5 times of PNB)". His government has vowed to clean up the banking sector and reduce the number of state-run banks.
Ms Sitharaman added that partial credit guarantee scheme for NBFCs has been executed since the last announcements and Rs 3,300 cr liquidity support has been given, while Rs 30,000 crore is in pipeline. There is also a buzz that the discussion might include merging public sector banks.
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