List of Merged Public Sector Banks in India

Here, we talk about which banks were combined during these mergers and how they affected the Indian banking sector. Read on to check the list of banks along with the merged entities. 

What are the Reasons Behind Bank Mergers?

Banks merge to boost competitiveness, resilience, and efficiency. In India, many small banks operated independently, reliant on government aid. This setup led to higher costs and limited innovation. 

Recognizing the need for a stronger banking system, the Reserve Bank of India advocated merging these banks. Merging improves access to capital and risk management. It also enables economies of scale, reducing costs. 

The announcement in August 2019 initiated the merger of 10 public sector banks into 4 larger entities. Further consolidations followed, resulting in 12 public sector banks. These mergers streamline operations and strengthen balance sheets. They also better equip banks to handle economic fluctuations and global market dynamics. 

List of Merged Banks

A bank merger is basically an agreement between the merged bank and the acquiring bank to combine assets and liabilities and become a single entity. The merger resulted in ten public sector banks becoming four public sector banks. 

Banks not Merged 

1. Central Bank of India 

1. Bank of India 

1. Punjab and Sind Bank 

1. Bank of Maharashtra 

1. UCO Bank 

1. Indian Overseas Bank 

Impact of Bank Merger on Customers

Though bank mergers do not directly affect the customers, there are several changes that they would have to face, a few of which are listed below: 

1. Post-acquisition, the loans of the merged bank would be transferred the acquiring bank. There are possibilities that new schemes will be launched, and old ones will be discontinued. 

1. Important details like Account number, IFSC code, BSR code, and customer ID will be changed. 
2. You will have to get a new passbook and cheque book. 
3. There is a possibility of old branches getting closed. 
4. A bank merger can also have an emotional impact on the customers. 

Merits of Public Sector Bank Mergers

Given below are the merits of bank merger:

Cost Efficiency and Operational Improvements in Bank Mergers

1. Cost Savings through Efficiency: Merging banks can eliminate duplicate processes, reduce administrative expenses, and negotiate better deals with suppliers due to increased bargaining power. This leads to overall cost savings for the merged entity. 
2. Streamlined Operations and Reduced Redundancies: Consolidating operations allows banks to streamline workflows, eliminate redundant processes, and optimize staffing levels. By reducing duplication and improving efficiency, merged banks can operate more smoothly and cost-effectively. 

Enhanced Access and Customer Experience Post-Merger

1. Broader Geographic Coverage: Merged banks can extend their reach to previously underserved or remote areas, providing banking services to a larger population. This broader geographic coverage ensures that more customers have access to essential financial services. 
2. Enhanced Access to Banking Services: With an expanded network of branches and ATMs, customers have more convenient access to banking facilities, leading to increased convenience and satisfaction. 
3. Enhanced Customer Experience: Merged banks can leverage their combined resources to offer better customer service, faster response times, and more personalized interactions. This results in an overall improved experience for customers, enhancing loyalty and retention. 

Product Diversification and Financial Capacity After Mergers

1. Diversified Product Portfolio: Merged banks can offer a wider range of financial products and services, including loans, insurance, investment products, and specialized banking services. This diversification allows customers to access a comprehensive suite of financial solutions tailored to their needs. 
2. Increased Financial Capacity: With a larger capital base resulting from the merger, banks have a greater capacity to extend credit and support larger projects. This increased financial capacity benefits businesses and individuals seeking financing for various purposes. 

Expertise and Best Practices in Merged Banks

1. Elevated Expertise and Best Practices: By combining teams and resources, merged banks can leverage the collective expertise and experience of both entities. This leads to the adoption of best practices, innovation, and continuous improvement in banking operations, ultimately enhancing efficiency and effectiveness. 

Reduced Government Dependency and Sustainability in Banking

1. Reduced Reliance on Government Support: Merged banks with stronger financial positions are less reliant on government support or bailouts. This promotes financial stability and sustainability in the banking sector, reducing the burden on government resources and taxpayers. 

Technological Advancements Due to Bank Mergers

1. Technological Innovation and Digital Transformation: Merged banks often invest in modernizing their technological infrastructure, implementing digital banking solutions, and enhancing cybersecurity measures. This technological innovation improves operational efficiency, enhances customer experience, and positions the bank for future growth and competitiveness in the digital era.

Demerits of Bank Merger

Given below are the demerits of a bank merger:

Impact on Decentralization Post Bank Mergers

1. Concerns about Local Banking Services: Many public sector banks operate with a focus on serving specific regions or communities. Mergers may disrupt this regional focus, leading to concerns about the availability and quality of local banking services. 
2. Centralization of Decision-Making: Larger merged entities may centralize decision-making processes, reducing autonomy at the local level. This can lead to slower response times to local needs and preferences. 

Governance and Bad Loans in Merged Banks

1. Governance Challenges: Merging banks with different corporate cultures and governance structures can create challenges in aligning policies and procedures. This can lead to inefficiencies and conflicts within the merged entity. 
2. Burden of Bad Loans: Addressing non-performing assets (NPAs) and bad loans inherited from merging banks can be a significant challenge. Integrating risk management practices and resolving bad loan issues require careful planning and execution. 

Global Economic Impact of Bank Mergers

1. Vulnerability to Global Economic Crises: Larger banks formed through mergers may be more susceptible to global economic downturns. Their size and interconnectedness could amplify the impact of financial crises, leading to greater systemic risks. 
2. Lack of Flexibility: Smaller banks often have more agility and flexibility to adapt to changing economic conditions. In contrast, larger merged banks may face challenges in quickly responding to market fluctuations and regulatory changes. 

Employee Challenges During Bank Mergers

1. Workforce Integration: After a merger, banking staff may experience uncertainty and anxiety due to changes in job roles, reporting structures, and working procedures. Integration processes can be disruptive and may lead to morale issues and talent retention challenges. 
2. Cultural Differences: Merging banks may have different organizational cultures, values, and work environments. Aligning these cultural differences and fostering a unified corporate culture can be a complex and time-consuming process. 

Challenges Faced by the Banks due to Mergers

Banks may face the below mentioned challenges due to mergers: 

1. The bank could face governance related issues as there are several departments that would be merged. 
2. Both the banks (acquiring and merging) would be required to handle data properly. 
3. In case of capital need, the capital infusion would have to be higher. 

1. Bank could face managerial level issue that might lead to downfall.