Sitharaman also announced the ten lenders to be granted funds in the government's latest cash infusion into state-run banks, after it announced in July plans to inject another 700 billion rupees ($9.79 billion) into the sector this fiscal year.
For example, with Maharashtra Assembly elections scheduled to take place in October, Bank of Maharashtra (BoM) may have been left out of the scheme of things vis-a-vis amalgamation.
The government on Friday announced multiple bank mergers, but assured that the employees of the banks would all be absorbed.
RBI said that larger banks are labour cost efficient: RBI said that larger banks are labour cost efficient relative to their smaller counterparts as the former can reap the benefits of economies of scale.
Revealing the thought process behind the mergers, Sitharaman said these weren't announced simply for the sake of merging, but after duly considering the synergies the banks will have.
Punjab National Bank, Oriental Bank of Commerce, United Bank of India have been merged to create the country's second largest PSB with a combined business of Rs 17.95 lakh crore. She said that Punjab National Bank, Oriental Bank of Commerce and United Bank will marge to acquire one unified identity.
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Sitharaman said 10 PSU banks were being merged to form four entities.
Last year, the government had merged Dena Bank and Vijaya Bank with Bank of Baroda, creating the third-largest bank by loans in the country.
Canara Bank and Syndicate Bank will merge; Union Bank of India, Andhra Bank and Corporation Bank will come together while Indian bank will merge with Allahabad Bank. His government has vowed to clean up the banking sector and reduce the number of state-run banks.
Global GDP growth may be revised downwards from the current estimate of 3.2 percent, she said adding that globally the demand was going to be weak.
The government has resorted to consolidation in the PSU space to make these banks competitive and financially strong players in the banking space.