IBPS Test 11

The consolidation of India's public sector banking landscape through a series of mergers has been one of the most far-reaching structural reforms in the financial sector in recent decades. The Government of India, as the majority shareholder of public sector banks, has driven this consolidation with the stated objectives of creating banks of greater scale, improving operational efficiency, reducing duplication of infrastructure, and strengthening the capital base of the merged entities. The rationale for bank mergers rests on several economic arguments. Larger banks can achieve economies of scale in operations, technology investment, and risk diversification. They can serve large corporate borrowers and infrastructure financing needs that smaller banks cannot accommodate within single-borrower exposure limits. A consolidated banking system is also considered easier for the regulator to supervise and less prone to individual bank failures that might require costly government bailouts. The first significant merger of the current wave was the consolidation of five associate banks and Bharatiya Mahila Bank into State Bank of India in 2017, creating an institution of truly global scale with thousands of branches and crores of customers. This was followed by the announcement of ten public sector bank mergers in 2019, which took effect in April 2020 and reduced the number of public sector banks from twenty-seven in 2017 to twelve. Under these mergers, Punjab National Bank absorbed Oriental Bank of Commerce and United Bank of India; Canara Bank merged with Syndicate Bank; Union Bank of India subsumed Andhra Bank and Corporation Bank; and Indian Bank took over Allahabad Bank. The integration of merged banks has involved complex processes including harmonisation of technology platforms, human resource rationalisation, branch network optimisation, and unification of product and service offerings. Employees of merged banks were given protections regarding service conditions through assurances from the government, though concerns about posting, career progression, and organisational culture changes have been voiced by bank employee unions. The merged banks have worked to consolidate their branch networks to eliminate duplication in the same geographical areas while maintaining adequate access for customers. Technology integration has been a particularly demanding aspect of mergers, as each bank had its own core banking systems, mobile banking platforms, and back-office processes that needed to be harmonised. Customer communication and transition management have been critical to ensuring that depositors and borrowers experience minimal disruption during the integration period.