Is the Merger of Public Sector Banks Again on Cards?

A government circular making rounds on social media sparked speculation about potential PSU bank mergers involving Union Bank of India, UCO Bank, Bank of India and Bank of Maharashtra.

Committee Deliberations on Post-Merger Regulatory Scenario
As per the agenda of the circular, the Committee on Subordinate Legislation, Lok Sabha plans to discuss with the representatives of Union Bank of India (UBI) and UCO Bank (in Mumbai on January 2), and Bank of Maharashtra (BoM) and Bank of India (BoI) (in Goa on January 6, 2023) on the rules/ regulations framed under the Banking Regulation Act, 1949, and other relevant Acts as applicable to them and “the regulatory scenario in post-merger scenario”.

The document, whose source couldn’t be verified, reveals that a Parliamentary committee is set to engage with four Public Sector Banks in early January. It will discuss banking laws governing mergers and acquisitions, among other regulatory aspects.

Image: Official Circular of the Department of Financial Services on Public Sector Banks and Insurance Organisation

Stock Shares Dip Amidst Speculation
The merger rumours have led to a decline in stock shares for the mentioned PSBs. Bank of Maharashtra shares fell 1.3% to Rs. 47, Union Bank of India dropped by 4% to Rs. 123, and Bank of India slipped 0.8% to Rs. 111 on December 18.

Government’s Response
The Union finance ministry has rectified the agenda of a parliamentary committee meeting scheduled for early next year, putting an end to speculation of a potential merger of public sector banks UCO Bank with Union Bank of India, and Bank of India with Bank of Maharashtra.

Although initial mentions of 'merger,' the fresh document released by the Department of Financial Services (DFS) omitted the term, leaving lingering questions about the potential merger of banks.

Social Media Speculations and Revisions
Following the circulation of the official circular on social media, users engaged in speculations. While many ridiculed the idea of PSB mergers, some speculated on potential scenarios. An anonymous banker from Bank of India suggested that the revised document indicates underlying concerns despite public scepticism.

A banker of Union Bank of India on the condition of anonymity told Kanal, “The documents viral on social media mention the words post-merger scenario for PSBs who have been out of the merger purview till date. Although many have ridiculed merger interpretation, revising of the document by the Finance Ministry indicates underlying concerns of the process.”

But on the other hand, an official of the Bank of India Officers Association indicated it to be a routine exercise, not specifically linked to any plan of merger.

Tamal Bandhopadhyay, an award-winning journalist and author of ‘Banker’s Trust’ weekly column tweeted - “The original version was changed last night to stop speculation on mergers of ⁦four public sector banks mentioned here. Never ever such mergers were discussed this way in the past. PSB bosses were called by ⁦⁦the Finance Ministry⁩ & told - nothing on the cards, rest assured.”

Another handle named The Banksters tweeted, “Sources from DFS is strongly of the view that UCO will be merged with Union Bank of India and Bank of India with Bank of Maharashtra. This process is likely to be completed at d earliest so that the merger takes place with effect from 01.04.24.”

In addition to it, Sanjay Nain, another banker tweeted that the document mentioned the post merger scenario in context of UCO bank, Union Bank of India, Bank of Maharashtra and Bank of India.

As rumours of potential PSU bank mergers circulate, the banking sector finds itself open to a debate among stakeholders such as bank unions, and the coming weeks may shed light on the larger questions surrounding merger.