Punjab National Bank could take control of two-three smaller public sector banks in the next round of banking sector consolidation, a Reuters report said. These smaller banks up for acquisition include Oriental Bank of Commerce, Andhra Bank and Allahabad Bank, the news agency reported quoting sources. PNB could begin the process of taking over these banks in the next three months, the report said.
However, the development has not been confirmed by PNB, the three other state-run banks, or the Ministry of Finance. There were speculations earlier this year that PNB would merge with certain smaller public sector banks. However, these reports were turned down by PNB.
India has been trying to consolidate its banking sector by merging smaller regional public-sector banks with larger government-owned banks. The idea is to reduce bad loans in the Indian banking sector, streamline operations and cut operating costs. Merging banks is also meant to create superior lenders which can size up to global competitors.
Only recently, the Chief Economic Advisor Krishnamurthy V Subramanian stated in an interview that having a few large banks that can tap into savings elsewhere is good for India. This will help these banks to enhance their quality and compete globally with the best of the world, he further added.
On similar lines, a report last month had indicated that the government could invite certain lenders for another round of merger. The list of banks included PNB, along with Union Bank of India and Bank of India. Only last month, the government had finalised the merger of Bank of Baroda, Vijaya Bank and Dena Bank, creating the country's third largest lender. This merger was the first step in the consolidation of the public sector banking industry as recommended by the Narasimham Committee in 1991.
The government has already orchestrated the takeover of embattled IDBI Bank by insurance major, Life Insurance Corporation of India. State Bank of India has already taken its subsidiaries and Bharatiya Mahila Bank under its fold back in April 2017.