Mega bank consolidation appears challenging

Mumbai: With the deadline of April 1 fast approaching for the mega merger of ten public sector banks, there seems to be more odd in the way of meeting the target date as a series of regulatory approvals and clearances are still pending, bank officials said.

Even after Cabinet approval to the proposed mega merger plan, officials said, fixation of share swap ratio, shareholders consent and other regulatory approvals are expected to take at least 30-45 days.

It is believed that the Prime Minister's Office (PMO) has sought details from these lenders about their financial projections for the next three to five years. Details in respect of NPAs, capital requirement, credit growth and cost savings on account of the mergers have been asked for, officials said.

So, chances of the merger becoming a reality beginning next fiscal year seems little unrealistic at the moment, a senior public sector bank official said. Besides, regulatory nods, the Scheme of Amalgamation has to be laid before Parliament for 30 days for the perusal of the members. The second half of the Budget session is scheduled to start on March 2.

Last year in August, the government announced the consolidation of ten public sector banks (PSBs) into four mega state-owned lenders. As per the plan, United Bank of India and Oriental Bank of Commerce would merge with Punjab National Bank, making the proposed entity the second largest public sector bank. It was decided to merge Syndicate Bank with Canara Bank, while Allahabad Bank with Indian Bank. Similarly, Andhra Bank and Corporation Bank are to be consolidated with Union Bank of India. According to a senior banker, information technology integration of Vijaya Bank and Dena Bank with Bank of Baroda is still in process even after 10 months of merger. In addition, the HR issues still continues to hamper business, causing inconvenience to customers.

Moreover, the mega merger would create greater disturbance in the banking system and will affect the operation especially loan sanction as there will be chaos initially for few months, the official added.