Current PSU bank mergers may face more friction than last one: India Ratings

CHENNAI: Bank consolidation is a good move from the government in step towards improving efficiency of the public sector banks (PSBs), Prakash Agarwal, head - Financial Institution,

India Ratings

and Research (Fitch Group), said. "Specifically, the measures announced to improve corporate governance and grooming leadership, if followed through with right intent, resources and commitment, can go a long way in addressing the challenges that PSBs has been facing historically,” Agarwal stated.


However, he also mentioned that, there is a possibility for the present mergers to face more friction than the last one with Bank of Baroda (BoB), Dena and Vijaya. Earlier, a large and well-capitalised strong bank has absorbed two much smaller entities. But the recently announced mergers are mostly among larger banks, with absorbing bank not necessarily in strong health.

“Thus, given the merged banks are on similar technology platform, the integration should be smoother. Also it is likely that management attention and bandwidth of the entities being merged could get split impacting the loan growth and reduce focus on strengthening asset quality in the short term,” he said.

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