List of Merged Public Sector Banks in India

The focus on the economy, profitability and cost-effectiveness is what brought in the bank merger in India. The growing competition among the key players in the same industry had a great impact on the economy and profitability. One other goal was to reduce and avert financial distress that arose out of bad loans. Restructuring of the banking industry with mergers was done for improving the performance both in terms of profitability as well as customer service.

Though the bank merger in India has proved to be good for the overall economy, we need to wait and watch the progress of the banking industry post-merger.

Bank Merger is an agreement between the acquiring bank and the merged bank to combine their assets and liabilities and become a single entity. The merger resulted in 10 Public Sector Banks pooled into 4 Public Sector Banks. However, IOB, Bank of Maharashtra, Punjab and Sind Bank, Bank of India, Central Bank of India and UCO Bank, which are region-centric, will remain as independent entities.

The grand success of the merger of State Bank of India with five associate banks and Bharatiya Mahila Bank further encouraged the initiative of 10 PSBs merging into four. Five associate banks that merged with the State Bank of India, include the State Bank of Bikaner and Jaipur, the State Bank of Mysore, the State Bank of Travancore, the State Bank of Patiala and State Bank of Hyderabad. The merger has resulted in the State Bank of India becoming a part of the 50 banks in the world. 

By acquiring 3 to 4 branches under their umbrella, top PSUs like Punjab National Bank, Canara Bank, Bank of Baroda, Indian Bank and Union Bank of India have now become large entities with a vast network of branches. 

In July 2023 HDFC is going to merge with HDFC bank to become the 2nd largest bank in India after accumulating a total balance sheet of Rs. 25 Lakh Crores which is only next to SBI which has a balance sheet of Rs. 42 Lakh Crores. This HDFC Merger with HDFC Bank would allow a greater flow of credit into the economy, which would be beneficial for the country's housing market. 

Punjab National Bank became the 2nd largest PSU after State Bank of India. Currently, there are 12 PSUs out of 27 earlier, including Bank of Baroda and State Bank of India. State Bank of India merger with its Associate Banks and Bharatiya Mahila Bank was in the year 2017, and the merger of Bank of Baroda, Vijaya Bank and Dena Bank was in the year 2019.

Branches of the merged banks will work as branches of the acquirer bank. For example, Syndicate Bank branches will now be Canara Bank branches. So customers of merged banks will be treated as customers of the acquirer bank. All the policies and guidelines of Canara Bank will be applicable to customers of Syndicate Bank.

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Besides the increase in the volume of assets and liabilities and widening of the network, there are several other merits as well as demerits of bank merger in India.

Merits of Bank Merger

The following are the merits of a Bank Merger in India:

• Reduction in operational costs.
• Increase in financial inclusion.
• The range of banking operations in the country will increase as the services can reach the nook and corner of the country with the increase in the network.
• Availability of technical expertise will improve, and there will be reduced scope of inefficiency, which was happening in small branches all this while.
• Wage disparity will be eliminated.
•  The need for infusion of funds by the Government to improve capital in PSUs time and gain will reduce.
• Removal of unnecessary posts, as well as designation, will reduce administrative expenses.
• The product range will improve and will give the customers a wider choice.

Demerits of Bank Merger in India

Though the merits of a Bank Merger are larger in the count, the demerits cannot be ruled out. The following are the demerits of Bank Merger in India:

• Most of the banks are region-centric, and mergers will defeat the purpose of decentralisation.
• The larger banks are impacted greatly by the global economic crisis, while the smaller banks can escape the impact.
• The larger banks will have greater pressure on performance because of the increased NPA volume owing to the pooling of NPA of weaker banks.
• Bad loans and bad governance are inherent issues, and the larger banks cannot get away from them by virtue of mergers.
• Face staff issues due to changes in the mode of working and the internal guidelines.