Over the weekend, reports of a merger between Union Bank and UCO Bank, and Bank of India and Bank of Maharashtra emerged on social media, citing a government document. Later, the finance ministry clarified that this was a parliamentary committee on subordinate legislation and it had no connection with policies on bank mergers.
What were the reported details of the merger? Is the merger of public sector banks on the government’s agenda? Here’s an explainer.
What was the issue?
A document with details of a proposed merger between Union Bank and UCO Bank, and Bank of India and Bank of Maharashtra was circulated on X (formerly Twitter). The subject of the alleged government document was: 'Study Visit programme of the Committee on Subordinate Legislation, Lok Sabha to Mumbai and Goa from 2 to 6 January 2024.' It was put out in the name of Ramesh Yadav, undersecretary of the Government of India.
The document was issued to the governor of the Reserve Bank of India, chairman of Life Insurance Corporation of India, Insurance Regulatory and Development Authority of India, and National Bank for Agriculture and Rural Development.
Also read: Two PSU bank mergers on cards? Govt issues clarification after doc fuels speculation
It was shared with the managing directors and CEOs of UCO Bank, Bank of Maharashtra, Bank of India, and Union Bank of India. The document, in PDF form, was also addressed to the CMDs of New India Assurance Company, United India Insurance Company, Oriental Insurance Company, National Insurance Company, and the MD & CEO of SBI Life Insurance Company.
What was the clarification?
The finance ministry issued a clarification, saying that this was a document related to a parliamentary committee on subordinate legislation and that it had no connection whatsoever with the policies on bank mergers.
The agenda of the meeting was reportedly changed and the new agenda did not mention the word “merger”. In other words, there is no proposal for a merger between Union Bank of India and UCO Bank, Bank of India, and Bank of Maharashtra.
What did the banks say?
Bankers told Moneycontrol that the document was interpreted wrongly and the reports were nothing but rumours.
"The earlier parliamentary committee meeting letter has been wrongly interpreted, so a new letter has been issued. It's all rumours and nothing of that sort is under discussion," said a top official from UCO Bank.
A top banker from Bank of Maharashtra said: "It’s all rumours and untrue."
Is the government planning to merge PSBs?
On October 11, Sanjeev Sanyal, member of the Economic Advisory Council to the Prime Minister, said in an interview with Moneycontrol that four large public sector banks will continue to exist even in the future and will continue to play an important part in the Indian banking system.
Also read: Four large public sector banks will continue to exist in future: Sanjeev Sanyal
When did the last round of PSB mergers happen?
On August 30, 2019, finance minister Nirmala Sitharaman had announced the merger of 10 state-run banks into four. According to this plan, Punjab National Bank absorbed Oriental Bank of Commerce and United Bank. Syndicate Bank merged with Canara Bank, and Union Bank of India absorbed both Andhra Bank and Corporation Bank. And Allahabad Bank merged with Indian Bank. The mega-merger came into effect on April 1, 2020.
This consolidation brought down the total number of PSBs to 12 from 27.
How did banks’ stocks react?
At 10.50 AM on December 18, the NIFTY PSU Bank Index was up 0.14 percent at 5,770.65. Shares of Union Bank of India fell 2.84 percent to Rs 124.65, while UCO Bank shares gained 3.19 percent to Rs 42.05. Bank of India’s shares declined 1.07 percent to Rs 111.35, and Bank of Maharashtra’s shares rose 1.48 percent to Rs 48.05.
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