PSU Bank Merger: Know how the 7 ways the merger will impact on you

 

Merger, in short, means the consolidation of two or more entities into one entity. Recently the Finance Minister Nirmala Sitharaman had announced a mega Merger for 10 PSU Bank into 4 Banks. This is going to be the biggest PSU Banking merger in India. 

But do we need to do anything before the merger? Yes if you have an account with any of these PSU Banks you need to take below measures ahead of PSU Bank merger

 

About PSU Bank Merger Announcement

We have seen the PSU Bank merger of SBI Bank with its five associates almost two years back and its smooth functioning. After its success, the government merged Vijay Bank, Dena Bank with Bank of Baroda last year. And now the finance minister Nirmala Sitharaman announced the mega PSU Bank merger from 10 banks to 4 banks.

The announcement of the mega PSU Bank merger came when the economy is at its slowest pace of 5 years.  Two years back, PSU Banks were in bad shape with scams, stressed assets and less income. PSU Banks are almost back on track now after taking several measures to clean up their NPAs.

Presently there are 18 PSU Banks in India, the government had announced to merge 10 PSU Banks into 4 banks. After that there with a total of 12 PSU Banks of post-mega-merger. 

The list of the new merger is given below. 

1. Indian Bank to be merged with Allahabad Bank. (Anchor Bank – Indian Bank)
2. PNB, OBC, and United will be merged (Anchor Bank -PNB)
3. Andhra Bank and Corporation Bank to be merged with Union Bank.  (Anchor Bank- Union Bank of India )
4. Syndicate Bank to be merged with Canara Bank ( Anchor Bank- Canara Bank)

 PSU Bank Merger- What is Anchor Bank and Amalgamating Bank

In a merger, the anchor bank means the Bank which is going to lead the weak banks after consolidation. Amalgamating banks are the weak banks that are getting merged with the lead bank/anchor bank. In the case of the last PSU Bank merger, Vijay Bank and Dena Bank are amalgamating bank and Bank of Baroda was the anchor bank.

Normally it was experienced that the customers of the amalgamating banks were directly affected by the merger. While the customer of the Anchor bank need not have to face any issues related to changes due to the merger.

The mega-merger of the PSU Banks from 10 banks to 4 banks will be completed by 31st March 2020. The Post-merger banking operation and activities will be starting from 1st April 2020 from the new financial year. 

If you have an account with any of the above banks particularly with the amalgamating bank, then you need to get ready for the below impacts on the merger. 

   

New Account number/Customer ID

If your account is with the Anchor branch you may not face too many changes in the mega PSU Bank merger. But if you are having an account with any of the amalgamating banks then you should be ready to face many changes. Your account number and customer ID may get change. 

If you have an account with more than one amalgamating banks like if one account with Oriental Bank and another with United Bank then both the account may get merged into one. Your correspondence and email address should be updated with your existing bank so that you can get all the information about the changes.

 

New Cheque book/Debit /Credit Cards

If you have an existing checkbook you can use it for the limited time frame later you need to submit the Cheque Book Requisition slip to get the new one. Similarly, in the case of debit and credit card also you can continue the existing one for a limited time frame. The old checkbook, Debit and credit cards need to be exchanged with the new Anchor bank’s name.

 

Resubmission of New Account details

You must have given your existing bank account number and IFSC code to various financial transactions for auto-debit and credit. Once you receive the new bank account numbers and IFSC code after the merger, you need to resubmit those numbers to all existing places. 

Some of the existing places where you must have used Bank Number or IFSC code are  IT Dept, Mutual Fund transactions, Brokers, Employers, Insurance companies, NPS department, etc. It is ideal to make a list of those services and fill the new bank update form to change the bank details.

 

Existing Fixed Deposits, Lockers & Loans:

Your existing Fixed deposit rate will continue to be the same rate post-PSU Bank merger. You will get the Fixed deposit Certificate on Anchor Banks’ name after the renewal of Fixed Deposit with the renewed rate of interest. 

The amalgamating bank’s EMIs or loans will be shifted with the existing MCLR rate of the Bank. However, the Anchor Bank’s rate will be levied in the next reset date. So if the Anchor Banks rate of Interest is 8.5% and the amalgamating bank rate is 8.70% then the customer of the later bank will be benefitted 0.20% after the next reset date.

Lockers of the amalgamating banks will continue the same. But if the Branch is getting shifted from that location then the locker will also be shifted.

 

Shifting of Branches 

After the merger, your bank branch may get shifted. If you are having a bank account with the OBC the amalgamating bank. Then your nearby branch could shut down on post-merger with PNB the Anchor Bank. If the Anchor bank has its own branch in that area, it may continue the same and merge the account holders of OBC and the United Bank into that Branch.

Similarly, you can also use ATM of all three banks of PNB, OBC and United Bank.

 

Equity Shareholders

The equity shareholders of all amalgamating banks and Anchor Bank will be affected by the merger. After the proper valuation, a swap ratio of the amalgamating banks with record date will be announced.  According to the ratio, the shareholders of the amalgamating banks will get the shares of the Anchor Bank it merged.

 

Net Banking and Technology

In order to make the merger successful, synchronization of the IT platform is going to be a challenging one for the banks. The mega PSU Bank merger has also considered the IT & software integration part in their plan. The merger is going to happen with banks using like alike software. For e.g PNB is using Finacle Banking Software similarly OBC and United Bank are also using the same software.

In order to run the PSU Bank as a professional outfit, the Finance Minister Nirmala Sitharaman had announced to recruit a non-executive Chairman and executive director in Technology. There are no possible chances to get an error in bank balances at the time of the merger. You should check the balances after the merger process is done.

 

Conclusions

The merger of PSU Banks will be done by the end of this financial year. You can use the new banking system from the 1st of April 2020. Once the merger process is completed then you may get an experience to bank with bigger, better and more efficient than the previous bank. The less the number of PSU banks will be better to manage, control and develop.

If you like the post please share it with others

You may also like to read,   PSU Bank Merger: Know which stocks to buy now

Your Stock Broker will never say these Hidden Charges.

10 best stocks/shares to buy now for 2020

Happy Investing!!!

 

Editor’s Desk