Govt is set to merge 3 PSBs and If accepted, the amalgamation will be a part of the government's efforts to create strong banks with larger capital to support the demand for credit and enable optimum utilisation of resources

New Delhi: The Modi government is planning to amalgamate Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and Punjab & Sind Bank (P&SB) in a move aimed to consolidate the public sector banking space. If accepted, the amalgamation will be a part of the government's efforts to create strong banks with larger capital to support the demand for credit and enable optimum utilisation of resources.

Inter-ministerial group to take the final call

"An inter-ministerial group (called Alternative Mechanism) under Union minister Arun Jaitley will take a final call on this plan. The (merger) option is on the table but whether the government is going to bite the bullet ahead of polls and announce amalgamation or choose to wait is yet to be seen," said one of the sources.

The PNB headquarters and Punjab & Sind Bank are located in Delhi, while OBC's is in Gurugram (Haryana). Following the amalgamation, the merged entity will have a total business of over Rs16.5 lakh crore, deposits of Rs9.6 lakh crore and advances of about Rs7 lakh crore, said the sources.

Merger will give birth to the second largest lender

The merger will also surpass Bank of Baroda's amalgamation, into which Vijaya Bank and Dena Bank have recently merged, to become the second largest state-run bank.

As of the December quarter, the net NPA ratio of PNB and OBC was 8.22 percent and 7.15 percent, respectively, improving from 11.24 percent and 10.48 percent at the end of March 2018.