(FE)
With a heavy mandate to push reforms, the BJP-led government may soon kick-start the next phase of consolidation in the public-sector banking space with an amalgamation of three lenders — Oriental Bank of Commerce (OBC), Indian Bank and Corporation Bank.
Banking sources told FE that OBC has sought the finance ministry’s approval to combine with Indian Bank and Corporation Bank. The ministry will consider OBC’s proposal and take a view soon, one of the sources said. However, there is no formal announcement from the finance ministry on the matter yet. Another source said the government may infuse `40,000-50,000 crore into public-sector banks (PSBs) this fiscal, having already provided `1,06,000 crore in FY19.
The news of potential merger seems to have spooked Indian Bank investors, as its share price tanked 5% on the BSE on Tuesday, far worse than a 0.5% fall in the Sensex. However, OBC shares gained 2.85% and those of Corporation bank rose 1.21%. The merger, if implemented, will be part of the government’s efforts to create a few but strong banks with much larger balance sheet to support the rising credit appetite of the fast-growing economy and enable optimum utilisation of resources.
