Mergers of Banks in India
In 2019, some significant changes were witnessed in the Indian banking system with the government’s plan to merge various public sector banks. Mergers are usually done to strengthen banks and improve customer reach and efficiency. Bank mergers result in the amalgamation of the assets, liabilities, and operations of multiple banks under a single entity. Sometimes it may lead to confusion for customers about their accounts and branches. However, you will be communicated by the bank through various modes if your bank has been merged with another.
List of Bank Mergers in India
A bank merger is an agreement between the merged bank(s) and the acquiring bank to combine assets as well as liabilities under a single entity. The recent merger resulted in ten public sector banks of India becoming four public sector banks. Below is the merger of banks list of those banks:
| Acquiring Bank | Merged Banks | Outcome |
|---|---|---|
| State Bank of India (SBI) | State Bank of Bikaner and Jaipur, State Bank of Mysore, State Bank of Patiala, Bharatiya Mahila Bank, State Bank of Travancore, State Bank of Hyderabad | SBI became the largest public sector bank in India after merging with its associate banks and Bharatiya Mahila Bank. |
| Punjab National Bank (PNB) | Oriental Bank of Commerce, United Bank of India | PNB became the second-largest public sector bank in India in terms of branch network. |
| Bank of Baroda | Vijaya Bank, Dena Bank | Bank of Baroda became the third-largest bank in India after merging with Vijaya and Dena Banks. |
| HDFC Bank | HDFC | HDFC merged with HDFC Bank to form a larger banking entity. |
| Canara Bank | Syndicate Bank | Canara Bank became the fourth-largest public sector bank in India after merging with Syndicate Bank. |
| Union Bank of India | Andhra Bank, Corporation Bank | Union Bank of India became the fifth-largest public sector bank in India after merging with Andhra and Corporation Banks. |
| Indian Bank | Allahabad Bank | Indian Bank became the seventh-largest public sector bank in India after merging with Allahabad Bank. |
6 banks were not merged, Below is the list of banks that remained independent after the India bank merger was announced:
- UCO Bank
- Indian Overseas Bank
- Punjab and Sind Bank
- Bank of Maharashtra
- Bank of India
- Central Bank of India
Top Bank Mergers in India
Below are the bank details of top bank mergers in India:
On April 1, 2017, the State Bank of India (SBI) merged with five of its associate banks (State Bank of Bikaner and Jaipur, State Bank of Travancore, State Bank of Mysore, State Bank of Patiala, and State Bank of Hyderabad) and the Bhartiya Mahila Bank. This merger created India’s largest public sector bank.
In April 2019, Bank of Baroda, Vijaya Bank, and Dena Bank merged, creating India's third-largest public sector bank. In the same year, Punjab National Bank (PNB), Oriental Bank of Commerce (OBC), and United Bank of India (UBI) merged, creating the second-largest PSU bank in India.
On April 1, 2020, Canara Bank absorbed Syndicate Bank, creating India's fourth-largest public sector bank. In the same year, the Indian Bank and Allahabad Bank merger happened and created India's seventh-largest PSU bank. The merger of Union Bank of India, Andhra Bank, and Corporation Bank also occurred in the same year, making India's fifth-largest PSU bank.
On July 1, 2023, HDFC Bank and Housing Development Finance Corporation (HDFC) merged in a $40 billion deal. As a result, the new bank has a market capitalisation of around $172 billion and a customer base of around 120 million.
What is a Bank Merger
A merger in banking is an amalgamation of two or more banks that combine their resources and operations to constitute a single institution. The merged entity is a bigger bank with more resources. By merging of two banks, there may be an improvement in investment returns, diversification of their product offerings, shared risks, and capturing of new markets.
Banks usually merge to boost competitiveness and efficiency. There are many small banks in India that operate independently but are reliant on government aid. This can lead to higher costs and limited innovation. The Reserve Bank of India (RBI) recognised the need for a stronger banking system and announced the merger of several such banks.
In August 2019, RBI announced the initiation of the merger of 10 public sector banks into 4 larger entities. These mergers streamline operations as well as strengthen balance sheets. They also enable banks to get better equiped to handle any economic fluctuations and global market dynamics.
Reasons for Bank Mergers in India
Below are the main reasons that lead to bank merger in India:
- More financial strength: Mergers allow banks to become larger entities that are more financially stable, helping them withstand financial shocks.
- Cost reduction: Combining operations can result in cost savings.
- Better risk management: Mergers can develop better risk management systems by pooling different resources and lowering the impact of a bank's bad decisions.
- Diversification: Mergers lead to the diversification of a bank’s product offerings.
- Access to new technologies: Mergers allow banks to adopt new technologies, like mobile banking and artificial intelligence (AI).
- Boost in credit growth: Larger banks are usually better positioned to lend to a large number of borrowers. This can boost credit and economic growth.
- Creating a wider reach: A larger bank with a bigger branch network can offer a better outreach to underserved areas.
Impact of Bank Mergers on the Indian Banking Sector
Bank mergers in India had various positive impacts on the banking sector, including:
- More resources: Mergers lead to the creation of larger entities with more resources.
- Increased capital: Mergers may increase a bank's capital and assets, which can be helpful during financial shocks.
- Diversified products and services: Mergers can help banks in offering a wider range of products and services.
- Lower costs: Mergers can help reduce the costs of banks.
- Risk management: Mergers can help improve risk management by pooling resources.
- Access to new technologies: Mergers can provide banks access to new technologies.
- Higher investment returns: Mergers can increase returns on investment by leveraging larger customer bases.
- Increased profitability: Mergers can improve the profitability of banks.
- Strengthened economy: Mergers can strengthen the country's economy.
- Reduced non-performing assets (NPAs): Mergers can help banks reduce NPAs.
- Enhanced efficiency: Mergers can improve the efficiency of banks.
- Wider branch network: Mergers can expand the reach of bank’s branch network.
- Increased global competitiveness: Merged entities can become more globally competitive and get greater recognition in the international market.
Impact of Bank Merger on Customers
Bank mergers do not affect the customers directly. However, there are several changes that customers would have to face, including:
- After the acquisition, the merged bank's loans must be transferred to the acquiring bank. There are chances of launching new schemes and discounting of old ones. This can create confusion for customers sometimes.
- Important details of the customer’s bank like Account number, BSR code, IFSC code, customer ID, etc. will be changed.
- There is a possibility that old branches will be closed.
- Customers will have to get a new passbook and chequebook.
- A bank merger can also have an emotional effect on customers.
FAQs
Bank of India is among the 6 banks that remained independent after the bank merger in India was announced. The Bank of India is operating as a separate entity.
A PSU bank merger is the process of integrating smaller public sector banks (PSUs) with larger ones to create more efficient and competitive banking entities. The goal of this merger is to strengthen the banking sector and thereby support the nation's economic growth and development.
Bank of Maharashtra is among the 6 banks that remained independent after the bank merger in India was announced. The bank is operating as a separate entity.
The five associate banks that merged with SBI (State Bank of India) in 2017 are State Bank of Bikaner and Jaipur (SBBJ), State Bank of Patiala (SBP), State Bank of Travancore (SBT), State Bank of Hyderabad (SBH), and State Bank of Mysore (SBM). The merger also included the Bharatiya Mahila Bank.
On 4th April 2022, HDFC announced that it would merge into HDFC Bank. This merger will make it the third-largest entity in India in terms of market capitalisation.
Yes, Syndicate Bank was merged with Canara Bank on April 1, 2020. The announcement of the merger was made by Finance Minister Nirmala Sitharaman on August 30, 2019.
The United Bank of India and the Oriental Bank of Commerce were merged with the Punjab National Bank (PNB) on April 1, 2020. As a result, PNB is now the second largest public sector bank in India in terms of branch network.
The merger of banks is vital for consolidation and expansion. It is also important for the nation’s economy. The problem of non-performing assets is accumulated because of inefficient policies. A merger between banks eliminates competition among them, thus reducing the marketing price of the products. Also, the reduction in prices benefits customers and increases sales.
The Oriental Bank of Commerce and the United Bank of India were merged with the Punjab National Bank on April 1, 2020.
Mergers usually take place between two banks to reduce costs or expand into a new market. It helps a bank scale up and acquire more customers, resulting in more capital to work with.
No bank has merged with UCO Bank. In July 2024, UCO Bank denied merger reports with the Bank of Maharashtra, Central Bank, and Punjab & Sind Bank.
Syndicate Bank was merged with Canara Bank on April 1, 2020.
Allahabad Bank was merged with Indian Bank on April 1, 2020, creating the seventh-largest public sector bank in India.
The Central Bank of India is not merged with any bank. However, the government of India has announced its plans to merge four public sector banks with other banks and the list also includes the Central Bank of India.
The Indian Overseas Bank was merged with Bharat Overseas Bank in March 2007.
Andhra Bank and Corporation Bank were merged with Union Bank of India on April 1, 2020.
No bank has merged with South Indian Bank.
The Indian Overseas Bank was merged with Bharat Overseas Bank in March 2007.
No bank has merged with Punjab and Sind Bank.