Here's what bankers have to say about PSU bank consolidation and recapitalisation

Finance Minister Nirmala Sitharaman with finance secretary Rajiv Kumar during a press conference in New Delhi | PTI

Finance Minister Nirmala Sitharaman with finance secretary Rajiv Kumar during a press conference in New Delhi | PTI

Consolidated PNB+OBC+United Bank to be second largest PSB with Rs18 lakh crore business and second-largest branch network in India, Finance Secretary Rajeev Kumar said.

According to Fitch, banks would require Dollars 13-15 billion of capital by FY21 over and above the Rs 70,000 crore that government is pumping into them this year. "We are giving the banks enough capital reserves, so they should have no worries", Sitharaman told reporters on Friday. It has a business of Rs 16.13 lakh crore. Union Bank too has a high gross NPA ratio of 15.18 per cent and its capital adequacy ratio at the end of the first quarter stood at 11.43 per cent.

Besides these mergers, the finance minister also announced a slew of governance reform steps in state-run banks, the most important one being the appointment of chief risk officers with market-linked compensation.

The bulk of frauds reported in 2018-19 come from bank groups PSBs that constitute the largest market share in bank lending, followed by private sector banks and foreign banks.

Last year, the government helped facilitate a merger of Dena Bank and Vijaya Bank with Bank of Baroda, creating the third-largest bank by loans in the country.

Indian Bank to be merged with Allahabad Bank.

The government also announced that two lenders based in southern India, Canara Bank and Syndicate Bank, would be amalgamated.

India Ratings head of financial institutions Prakash Agarwal said the mergers are mostly among larger banks, with absorbing bank not necessarily in strong health.

The Indian Bank will merge with the Allahabad Bank to become the seventh-largest with Rs 8.08 lakh crore business. "Rs 55,250 crore capital for credit growth and regulatory compliance to support the economy", she said.

The UCO Bank will get Rs 2,100 crore, the United Bank of India Rs 1,600 crore and the Punjab & Sind Bank Rs 750 crore. "Bank of India with Rs 9.3 lakh crore of business size and Central Bank with Rs 4.68 lakh crore of business size will continue", she added. This is a big positive for state-run banks.

She said that 14 out of 18 Public Sector Unit banks were running in profits.

After Vijaya Bank was merged with Dena Bank and Bank of Baroda (BoB), three other banks which had its genesis in the undivided district of Dakshina Kannada are all set to merge.

All PSU banks will now have a non-executive chairman, a position earlier existed only in State Bank of India (SBI), India's largest lender.

During the presser, Sitharaman and the bureaucrats resent made it clear that there are no immediate plans on cards to cut government's stake in these banks below 51 percent.

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