Nirmala Sitharaman says banks will play an important role in making India a $5 trillion economy.
Continuing the Modi government's push for structural reforms in the banking sector, Union Finance Minister Nirmala Sitharaman on Friday said the government would merge Punjab National Bank with Oriental Bank and United Bank. This has been done after the successful merger of three public sector banks - Bank of Baroda, Vijaya Bank and Dena Bank - earlier this year, the FM said.
The FM said the earlier bank mergers had shown that consolidated banks had shown rapid growth, high profit and valuation gains as a result of scale and synergy benefits.
She said the merger of PNB with OBC and United Bank will make it the second-largest PSB with Rs 18 lakh crore business and second-largest branch network in India.
The FM said banks would play an important role in making India a $5 trillion economy, for that they needed more lending capacity so they could provide better services using modern technology. "Consolidation is the way forward," she said.
The FM said with the merger of these banks, the bigger banks would focus on international markets, while middle-level banks would focus on the national market. The smaller banks would now focus on the regional markets, she said.
The FM said while there were 27 PSBs in 2017, there would just 12 banks from now on, which will be adequately financed.