After SBI, Punjab National Bank, Bank of Baroda to consider merger with smaller banks


Following the merger of SBI with its associate banks and Bharatiya Mahila Bank, the government is mulling the idea of merging smaller banks with Punjab National Bank (PNB) and Bank of Baroda (BoB).

Punjab and Sind Bank could be merged with Punjab National Bank to consolidate their position.

PNB and BoB are state-run banks, with BoB ranking second among state-run banks in terms of lending. PNB follows BoB, coming in third position in terms of lending by state-run banks.

The idea behind this merger is to improve the functioning of state-run banks, aiming to have six large state-run banks which can function on a global scale. It has been seen that a number of smaller state-run banks have required a bailout from the government, which officials hope to eliminate with these mergers.

While Punjab & Sind Bank will merge with PNB, the Indian Overseas Bank (IOB) is likely to merge with BoB. Shares of all four banks rose following news of this impending merger.

Bank Number of branches*
Bank of Baroda 5,391
Punjab National Bank 6,888
Indian Overseas Bank 3,700
Punjab & Sind Bank 1,466

*As of December 2016.

IOB saw its shares jump to Rs.29.20, while Punjab & Sind Bank shares rose to Rs.61.10, registering growth of 5.22 and 6.35 per cent respectively.

PNB shares jumped to a high of Rs.163.50, a gain of 2.95 per cent. Bank of Baroda shares traded at a high of Rs.181.70, a growth of almost 3 per cent.

Private banks might also jump on the bandwagon, aiming to consolidate their position by acquiring underperforming private banks.

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