The Union Budget for 2019-20 is likely to spell out roadmap for banking reforms, including consolidation of the state-owned lenders, with a view to enabling the sector to play a pivotal role in pushing India towards USD 5 trillion economy.
According to sources, the first Budget of Modi 2.0 government is scheduled to be presented on July 5 by Finance Minister Nirmala Sitharaman in the backdrop of India’s economy hitting 5-year low growth of 6.8 per cent in 2018-19.
Since the banking sector has an important role in reinvigorating the sagging economy, the Budget speech of the Finance Minister is expected to contain roadmap for the reforms in the sector. The Budget may also provide direction to the consolidation journey in the public sector banking space, started last year, by effecting first three-way merger.
As part of this exercise, erstwhile Vijaya Bank and Dena Bank were merged with Bank of Baroda (BoB) effective April 1 to create the third-largest lender of the country. The government infused Rs 5,042 crore in BoB to enhance its capital base to meet additional expense due to amalgamation of Dena Bank and Vijaya Bank.The journey will continue broadly on the same lines of merger of smaller banks with bigger ones. Punjab National Bank, Canara Bank, Bank of India and Union Bank of India are set for merger.
Since the banking sector has an important role in reinvigorating the sagging economy, the Budget speech of the Finance Minister is expected to contain roadmap for the reforms in the sector
The three-way amalgamation is the first step in the consolidation of the public sector banking industry, recommended in 1991 by the Narasimham Committee report. Through this merger, the government has created an institution of global scale and size, thereby providing significant benefit to all stakeholders.
BoB, the second-largest public sector lender after State Bank of India, now has over 9,500 branches, 13,400 ATMs, and 85,000 employees to serve 12 crore customers.
Prior to the merger of BoB , six associate banks – State Bank of Patiala, State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Travancore and State Bank of Hyderabad and Bhartiya Mahila Bank were merged with the State Bank with effect from April 2017.