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• 10 Public Sector Undertaking (PSU) banks will be merged into 4 banks from, 1 April 2020 according to RBI.
• Punjab National Bank (PNB) will overtake the Oriental Bank of Commerce and the United Bank of India, forming the second-largest public sector bank in the country.
• Syndicate Bank will merge into Canara Bank to form the fourth largest PSB.
• Union Bank of India will be merged with Andhra Bank and Corporation Bank, making it the fifth-largest public sector bank in the country.
• Indian Bank will be merged with Allahabad Bank to become the seventh-largest PBS.
• After the merger, there will be 12 PSUs in India – six merged banks and six independent public sector banks.
• Six merged banks – SBI, Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India and Indian Bank
• Six independent banks – Indian Overseas Bank, UCO Bank, Bank of Maharashtra, Punjab and Sind Bank, Bank of India and Central Bank of India.
• The branches of the merging banks will operate as branches of the banks in which they have been merged. 

• Customers of merging banks will also now be treated as customers of the banks in which these banks have been merged.

• Account Number, Customer IDs Likely to Change

• Re-submission of Account Details for Auto-Credits/Debits

• Deposit, Lending Rates to be Decided by Merged Entity
• Credit/debit cards issued by the merging banks may have to be exchanged for those of the merged entity

Despite nation-wide lockdown due to coronavirus announced by the Government, 10 Public Sector Undertaking (PSU) banks will be merged into 4 banks from, 1 April 2020 according to RBI. 

In the statement, RBI said, “The Amalgamation of Oriental Bank of Commerce and United Bank of India into Punjab National Bank Scheme, 2020 dated March 4, 2020, issued by the Government of India. The scheme comes into force on the 1st day of April 2020.”

With this merger, the number of public sector banks in India will come down to 12 from 27 in 2017 when the State Bank of India (SBI) took over five of its associates and Bharatiya Mahila Bank. In 2019, Vijaya Bank and Dena Bank merged with Bank of Baroda, making it the third-largest state-run bank.

The branches of the merging banks will operate as branches of the banks in which they have been merged. Customers of merging banks will also now be treated as customers of the banks in which these banks have been merged.

Here are key points you need to know about the mega-merger of 10 PSU banks from 1 April:

• As per the plan of the merger, Punjab National Bank (PNB) will overtake the Oriental Bank of Commerce and the United Bank of India. After the merger, these three together will form the second-largest public sector bank in the country. The State Bank of India (SBI) is the country’s largest state-run lender. PNB has also unveiled its new logo which will bear distinct signages of all three lenders. The branches of Oriental Bank of Commerce and the United Bank of India will operate as branches of PNB.
• Syndicate Bank will merge into Canara Bank to form the fourth largest PSB with a business of Rs 15.20 lakh crore. The bank will have 10,391 branches, 12,829 ATMs and the combined strength of 91,685 employees.
• Indian Bank will be merged with Allahabad Bank to become the seventh-largest PBS with a business of Rs 8.08 lakh crore. The combined entity would have 6,060 branches, a network of 2,870 ATMs and a banking correspondent network of 9,000.
• Union Bank of India will be merged with Andhra Bank and Corporation Bank, making it the fifth-largest public sector bank in the country. Following the merger, all investments of Andhra Bank and Corporation Bank will come under Union Bank as a combined entity.
• After the merger, there will be 12 PSUs – six merged banks and six independent public sector banks.
• Six merged banks – SBI, Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India, Indian Bank
• Six independent banks – Indian Overseas Bank, Uco Bank, Bank of Maharashtra, Punjab and Sind Bank, Bank of India, Central Bank of India.
• Most importantly, all customers, including depositors of merging banks will be treated as customers of the banks in which these banks have been merged with effect from 1 April 2020.
• According to the government, the PSUs merger will create seven large public sector entities with scale and national reach-with each amalgamated entity having business over Rs 8 lakh crore.

If you are a customer of one or more of the banks being merged, the mergers can have a few significant implications for you. Here is a look at some of them.

Account Number, Customer IDs Likely to Change

You are likely to get a new account number and customer ID. Make sure your email address/physical address and mobile number is updated with your bank so that you receive official intimations on change of account numbers. Moreover, all your accounts will be tagged to a single customer ID. Let us say you have an account with Oriental Bank of Commerce and one at United Bank of India; the two accounts will be allotted a  ..

Re-submission of Account Details for Auto-Credits/Debits

You would have given your bank account numbers and IFSC codes for various financial transactions – auto credit of dividends via ECS, auto-credit of salary, auto-debit of various bills/charges, etc. Unless these accounts are seamlessly merged into the financial system of the anchor bank, you would be required to change the details of your bank account given for these purposes.

Customers who are allotted new account numbers or IFSC codes will have to update these details with various third-party entities where they had earlier given details of their accounts in the amalgamating banks. These will include :

• The income tax department for tax refunds
• Insurance companies to get maturity proceeds
• Mutual funds to get the redemption amounts
• National Pension System (NPS), among others

Another thing you will have to keep in mind is that the post-merger entity will have to honour all electronic clearing service (ECS) mandates and post-dated cheques. 

• Make enquiries with your bank, fund house and insurance companies and issue fresh ECS mandates, if required. 
• You will have to fill up the ECS mandate forms online or through your branches. 
• In case of auto-debits for systematic investment plans (SIP), you may have to submit fresh SIP registration-cum-mandate forms. 
• You will have to fill up the ECS mandate forms online or through your branches. 
• In the case of auto-debits for systematic investment plans (SIP), you may have to submit fresh SIP registration-cum-mandate forms. 
• You will have to do the same for loan EMIs. 
• Customers are usually allowed to use balance cheque leaves and existing cheque books for 6-12 months.

Customers will have to deal with the branch rationalization exercise. For instance, your existing home branch could shut shop if the new acquiring entity has its own branch in the same vicinity. Keep an eye on the new IFSC and MICR code applicable to your branch and account since you will have to quote it for funds transfer and other financial transactions.

A plus point is that hopefully, the branch network would become larger so access to bank branches should become easier provided the merged entity does not shut down all branches of merging banks. 

Borrowers: Deposit, Lending Rates to be Decided by Merged Entity

When a bank merger takes place, how does it impact an existing borrower? For instance, those who took a loan from Dena Bank or Vijaya Bank how will their loans get impacted? Is their existing MCLR related loan still operational or will they have to switch to BOB following BOB’s terms and conditions?

A senior banking official explains, “All MCLR linked retail loans are migrated to the MCLR of the amalgamated bank. In the case of Dena and Vijaya bank, MCLR linked retail loan customers have migrated automatically to the Bank of Baroda MCLR, which in this instance was 8.65% as of March 2019. Pre-amalgamation the MCLR of Dena Bank was 8.80% and Vijaya Bank was 8.75%. Hence, customers of Vijaya and Dena benefited from the lower MCLR of Bank of Baroda.” For customers of Bank of Baroda, there was no impact, but for Vijaya and Dena customers there was a positive impact by a reduction in MCLR.

Hence, post amalgamation there was only one MCLR of Bank of Baroda and all loans are now linked to that, which was automatic for loans already linked to MCLR of the erstwhile banks.

It is, however, not clear what will happen to the interest rates payable on loans taken by those who have loans running with the amalgamating banks as the MCLR rates are different for different banks.

Credit/Debit Cards

Credit/debit cards issued by the merging banks may have to be exchanged for those of the merged entity at some stage although the former are likely to remain valid for the interim period or even longer to ensure no disruption in services.

Paperwork

Paperwork and keeping a financial trail of fixed deposits made will increase a bit as these will be transferred into the merged bank.

You simply need to wait and watch in the coming days as more details about these mergers are announced to see the actual impact it can have on account holders.