Explained: What bank mergers can mean, the potential downsides

The plan is to merge 10 state-owned banks into four larger ones. What led to the move, how is it intended to help the banks and the government, and what are the potential downsides?

public sector banks merger news, public sector banks merger, PSB merger, Public sector bank merger, PSU banks merger, nirmala sitharaman, indian banks, indian economy news, — Finance Minister Nirmala Sitharaman during a press conference in Delhi to announce the merger plans. (Express Photo: Amit Mehra)

On Friday, Finance Minister Nirmala Sitharaman announced the government’s decision to merge 10 state-owned banks to create four large entities or lenders. Under the plan, Oriental Bank of Commerce and United Bank of India will be merged with Punjab National Bank; Canara Bank with Syndicate Bank; Andhra Bank and Corporation Bank with Mumbai-based Union Bank of India; and Allahabad Bank with Indian Bank. That will mean a consolidation of banks in India from 27 before 2017, to 12 after the merger goes through. What are the upside and downside of this move?