: The Union finance ministry has rectified the agenda of a parliamentary committee meeting scheduled for early next year, putting an end to speculation of a potential merger of public sector banks— with , and Bank of India with .

In a letter addressed to, among others, the bank chiefs of the four PSU banks and Reserve Bank of India governor on Thursday, the finance ministry said that the members of the parliamentary committee would hold informal discussions with UCO Bank and Union Bank, besides Bank of India and Bank of Maharashtra, over the “regulatory mechanism in post-merger scenario”. One of the subjects of the meeting as listed out in the first letter dated 14 December said: “Informal discussion with representatives of Union Bank of India and UCO Bank on rules/regulations framed under Banking Regulations Act, 1949 and other relevant Acts as applicable to them and the regulatory mechanism in post merger scenario.” This letter gave rise to speculation that Union Bank, which had just consummated a merger of Corporation Bank and Andhra Bank with itself, was set for another merger with the Kolkata-based UCO Bank. This was, however, put to rest after the ministry’s clarification on Saturday, in which the word “merger” was dropped from the letter. An executive director at one of the four banks clarified to Mint that there has been no discussion with the government regarding the merger, and the letter was just mis-interpreted by the public. “The parliamentary committee cannot initiate a discussion with the banks on the merger without the government’s involvement. We have had no talks with the government on the same,” the banker said on the condition that he not be named. “The letter says post-merger scenario, which just means post the merger which happened two years ago,” he said. On 1 April, 2020, 10 PSU banks merged to become four banks, as part of the mega bank consolidation plan. As per the scheme, Oriental Bank of Commerce and United Bank of India merged into Punjab National Bank; Syndicate Bank into Canara Bank; Allahabad Bank into Indian Bank; and Andhra and Corporation banks into Union Bank of India. An RBI occasional paper, released on 20 February, said that bank mergers in India have been, on average, beneficial to the banking sector as the financial performance and efficiency of acquirers improved post-merger. The study covered all registered mergers and acquisitions in the Indian commercial banking industry, between 1997 and 2020. The sample reduced to include 17 merger cases during 1997- 2017 and five merger cases during 2019-2020 . India currently has 12 PSU banks, from as many as 27 in 2017. About a decade back, public sector banks were reeling under a mountain of sour loans, prompting the government to initiate a slew of measures to restore their financial health. These included capital infusion and merger of banks, which enlarged their capital base and reduced the operational as well as administrative expenditure. Now that these banks have turned profitable, they have been making a beeline to raise equity capital this year, driven by their improved valuations. Lenders like Union Bank, Bank of India, Indian Bank and Bank of Mahrashtra have raised capital through the qualified institutional placement (QIP) route this year. Union Bank, Indian bank and Bank of India each raised around 4,000-5,000 crore this year. BANK OF MAHARASHTRA Livemint tops charts as the fastest growing news website in the world to know more.
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