Bank Mergers: Punjab National Bank Will Take Over Oriental Bank Of Commerce And United Bank
The Narendra Modi government will merge Punjab National Bank with Oriental Bank of Commerce and United Bank of India as part of its larger plan to merge 10 public sector banks into four, bringing down the number of state-owned lenders to 12 from 21.
“The three bank merger will bring lot of synergies in the amalgamated entity because Oriental Bank of Commerce has got good systems and processes. We have overlapping geographical presence where we can optimise utilisation of our infrastructure as well as resources and improve profitability,” Sunil Mehta, chief executive officer of PNB, told BloombergQuint. “United Bank of India has a lot of strength, a large CASA base and especially they have a presence in east and northeast India.”
So the bank will be able to serve a lot of new customers and existing customers on a pan India basis. This will bring in a lot of convenience for the customers.Sunil Mehta, CEO, PNB
The Acquirer Bank
Punjab National Bank
Punjab National Bank will take over Oriental Bank of Commerce and Kolkata-based United Bank of India. This will create India’s second-largest public sector bank, after State Bank of India. The combined business of all three banks is 1.5 times higher than PNB’s existing business, said Sitharaman. The combined advances base of the merged bank will be Rs 7.5 lakh crore and t he deposit base will stand at Rs 10.43 lakh crore.
The merger comes at a time when PNB continues to have its own set of issues. The bank is just about recovering from the near $2-billion Nirav Modi fraud and still has a high level of non-performing assets. Its gross NPA ratio stood at 16.5 percent as of June 2019.
The bank reported a capital adequacy ratio of 9.77 percent as of first quarter ended June. To enable the bank to go through with the acquisitions, the government may have to supply more capital to PNB. The bank will receive Rs 16,000 crore worth capital from the government to complete the merger.
The Banks Being Acquired
Oriental Bank of Commerce
The Delhi-headquartered bank has had a higher bad loan ratio, combined with low capital adequacy. It was recently released from the prompt corrective action framework of the Reserve Bank of India (RBI) after the government provided it with capital. It will be merged with Punjab National Bank, the finance minister said.
United Bank of India
United Bank of India is also an eastern-India focused bank. It has a gross NPA ratio of nearly 23 percent. The bank will be merged with Punjab National Bank.