PSB Amalgations : An era of Defragmentation or Fusion

 

An Amalgamation may be combination of two or more companies into a brand new entity. Amalgamation is distinct from a merger because neither company involved survives as a legal entity. The term amalgamation has generally fallen out of popular use within the U.S. , being replaced with the terms merger or consolidation. But it's still commonly utilized in the countries like India. Amalgamation can help in increasing cash resources, eliminate competition, and save the businesses on taxes. But it can result in a monopoly if an excessive amount of competition is cut out, scale down the workforce, and increase the new entity's debt load.

Banks merge and amalgamate for these objectives:

  • It helps to lower the extent of competition within the market.
  • To enlarge the market further without expanding the competition.
  • The bank gains more assets by the assimilating resources of both banks.
  • To have access to more capital despite investing less amount.
  • Once two banks unite their customer base also becomes double.

State Bank of India ( SBI ) :

SBI merged with its associate bank State Bank of Saurashtra in 2008 and State Bank of Indore in 2009. Following the  merger process, the merger of the 5 remaining associate banks, (viz. State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore  and  the Bharatiya Mahila Bank) with the SBI was given an in-principle approval by the Union Cabinet on 15 June 2016. After  a month  the SBI board, on 17 May 2016,had cleared a proposal to merge its five associate banks and Bharatiya Mahila Bank with itself.

On 15 February 2017, the Union Cabinet approved the merger of 5 associate banks with SBI. An analyst predetermined an initial negative impact of various pension liability provisions and accounting policies for bad loans. The merger went into effect from 1 April 2017.

Bank of Baroda ( BOB ) :

On 17 September 2018, the Govt. of India proposed  the amalgamation of Dena Bank  and Vijaya Bank  with  Bank of Baroda , pending (namesake) approval from  the Boards of the three banks. The Union Cabinet and therefore the Boards of the banks approved  the merger on 2 January 2019. Under the terms of the amalgamation, Dena Bank and Vijaya Bank shareholders received 110 and 402 equity shares of the Bank of Baroda  respectively. The amalgamation became effective from 1 April 2019.

Punjab National Bank ( PNB ) :

On 30 August 2019, the Minister of Finance  announced  that the Oriental Bank of Commerce  and United Bank of India  would be merged with the Punjab National Bank. The Union Cabinet approved the merger on 4 March 2020. PNB announced that its board had approved the merger ratios the subsequent day. The merge came into effect since 1 April 2020. PNB became the second largest PSB after SBI with the assets of Rs.17.95 lakh crore (US$250 billion) and 11,437 branches.

Canara Bank :

On 30 August 2019, the Minister of Finance announced that Syndicate Bank  would be merged with Canara Bank. The proposal would create the fourth largest PSB following SBI, PNB, BoB with assets of  Rs.15.20 lakh crore (US$210 billion) and 10,324 branches. The Board of Directors of Canara Bank approved the merger on 13 September 2019.  The Union Cabinet approved the merger on 4 March 2020. Canara Bank speculated to control over Syndicate Bank on 1 April 2020 with Syndicate Bank,

Union Bank :

On 30 August 2019, the Minister of Finance announced that Andhra Bank  and Corporation Bank  would be merged into Union Bank of India. The proposal would make Union Bank of India the fifth largest PSB with an assets of  Rs.14.59 lakh crore (US$200 billion) and 9,609 branches. The Board of Directors of Andhra Bank approved the merger on 13 September. The Union Cabinet  approved the merger on 4 March, and it was completed on 1 April 2020.

Indian Bank :

On 30 August 2019, the Minister of Finance announced that Allahabad Bank would be merged with Indian Bank. The proposal would create the seventh largest PSB within the country with assets of Rs8.08 lakh crore (US$110 billion). The Union Cabinet approved the merger on 4 March 2020. Indian Bank alleged to take  control of Allahabad Bank on 1 April 2020.



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