New Delhi, March 4: The Union Cabinet on Wednesday approved merger of 10 public sector banks into four with effect from the new financial year beginning on April 1. This includes amalgamation of Oriental Bank of Commerce and United Bank of India into Punjab National Bank, amalgamation of Syndicate Bank into Canara Bank, amalgamation of Andhra Bank and Corporation Bank into Union Bank of India and amalgamation of Allahabad Bank into Indian Bank.

The move will result in creation of seven large PSBs with scale and national reach with each amalgamated entity having a business of over Rs 8 lakh crore. "The mega consolidation will help create banks with a scale comparable to global banks and capable of competing effectively in India and globally," said Finance Minister Nirmala Sitharaman. Bank Mergers Under Modi Government: 27 PSBs Reduced to 12 in Last Two Years.

"Greater scale and synergy through consolidation will lead to cost benefits which should enable the PSBs to enhance their competitiveness and positively impact the Indian banking system," she said. In addition, the consolidation will also provide impetus to amalgamated entities by increasing their ability to support larger ticket-size lending and have competitive operations by virtue of greater financial capacity.

The adoption of best practices across amalgamating entities will enable the banks to improve their cost efficiency and risk management, and also boost the goal of financial inclusion through wider reach, according to an official statement.

With the adoption of technologies across the amalgamating banks, access to a wider talent pool, and a larger database, PSBs will be in a position to gain competitive advantage by leveraging analytics in a rapidly-digitalising banking landscape.