Merger News: Mega merger of 10 PSU banks takes effect; all you need to know

The merger of ten government-run banks into four will come into force from April 1. 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. The banks' merger was announced last year in August and the union cabinet gave the final approval on March 4. In the past, various other bank mergers have taken place. For instance, in 2017, the country's largest public lender - the State Bank of India took over five of its associates and Bharatiya Mahila Bank. Last year, Vijaya Bank and Dena Bank were merged with Bank of Baroda. Kotak Mahindra Bankcand ING Vysya Bank merger and amalgamation of Centurion Bank of Punjab Ltd. with HDFC Bank took place in 2014 and 2008, respectively.

Here are a few aspects of the PSU bank merger:

1. As per the latest merger- Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will be merged with Punjab National Bank (PNB). The merged entity will become the second-largest state-run bank. The new entity will have a business of Rs 17.95 lakh crore and 11,437 branches.

2. The amalgamation of Syndicate Bank into Canara Bank will create the fourth-largest public sector bank with Rs 15.20 lakh crore business and a network of 10,324 branches.

3. Allahabad Bank branches will operate as those of the Indian Bank. The merger of Allahabad Bank with the Indian Bank will create the seventh-largest public sector bank with Rs 8.08 lakh crore business.

4. Branches of Andhra Bank and Corporation Bank will function as the branches of Union Bank of India. Andhra Bank and Corporation Bank's merger with Union Bank of India will create India's fifth-largest public sector bank with Rs 14.59 lakh crore business and 9,609 branches.

5. The government had front-loaded Rs 68,855 crore to take care of the bank-merger plan.

6. Punjab National Bank was given Rs 16,091 crore, Union Bank of India Rs 11,768 crore, Canara Bank Rs 6,571 crore and Indian Bank Rs 2,534 crore. Allahabad Bank was provided Rs 2,153 crore, United Bank of India Rs 1,666 crore, Andhra Bank Rs 200 crore, Indian Overseas Bank Rs 4,360 crore and UCO Bank Rs 2,142 crore.

7. According to the government, the merger of the 10 banks will lead to the creation of stronger establishments. This merger would follow in the example of the amalgamation of Bank of Baroda, Vijaya Bank, and Dena Bank last year.

8. With this mega-bank mergers, the number of PSBs will get consolidated from 27 banks in 2017 to 12 banks in 2020.

9. The new 12 public sector banks will be -- six merged banks and six independent banks. State Bank of India, Bank of Baroda, Punjab National Bank, Canara Bank, Union Bank of India, Indian Bank will be the six merged banks. And Bank of India(BoI), Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab and Sind Bank, which have a strong regional focus, will remain independent entities.

Read More

PSU banks announce share-swap ratios ahead of April 1 merger

Following the footsteps of State Bank of India and Bank of Baroda, the boards of 10 public-sector banks on Thursday approved mergers and issued share-swap ratios to create four large banks in the economy.

The four anchor banks will be Punjab National Bank, Canara Bank, Union Bank of India, and Indian Bank. The merger will be effective from April 1.

Last year, Bank of Baroda took over Vijaya Bank and Dena Bank. Before that, State Bank of India (SBI) had merged all its five associate banks with itself to enter the global top 50 banks’ list in terms of size. Punjab National Bank (PNB) will merge with United Bank of India and Oriental Bank of Commerce to create the largest bank in the country after State Bank of India.

According to notifications to the stock exchanges, Delhi-based PNB will issue 1,150 shares for 1,000 shares of Oriental Bank of Commerce, and 121 shares for 1,000 shares of United Bank of India.

Mumbai-based Union Bank of India will take Andhra Bank and Corporation Bank. Union Bank of India will issue 325 shares for 1,000 shares of Andhra Bank, and 330 shares for 1,000 shares of Corporation Bank.

Bengaluru-based Canara Bank will issue 158 shares for 1,000 shares of Syndicate Bank.

Allahabad Bank said for every 1,000 shares (face value Rs 10) of Allahabad Bank, there would be 115 shares (face value Rs 10) of Indian Bank.

The Union Cabinet had approved the consolidation to build the mega banks “to create more efficient and bigger public sector banks in the challenging environment to meet the credit needs of a growing economy and to achieve operational efficiency by scale of business”. The amalgamation will lead to a wide geographical reach, technology adaption, and, more importantly, better utilisation of scarce capital.

A grievance redress system has been put in place, and a committee has been formed headed by a retired judge. If shareholders have any issue with the swap ratio — for example, if they feel they didn’t get enough time or if they need information — they can raise it. This is the board-approved swap ratio.

“After the committee receives all the grievances, it will have seven days to recommend changes, if needed, which will be the final swap ratio,” said a top official of a PSB to be merged.

Read More

Punjab National Bank(PNB) reported surprise loss in Q3

Public lender Punjab National Bank on Tuesday reported a surprise standalone loss of Rs 492.28 crore for the December quarter compared with a profit of Rs 246.51 crore in the same period last year.

Analysts were expecting a spike in the profit number on account of recovering from an NCLT account.

The PSU bank said provisions for the quarter jumped 73.25 per cent year-on-year to Rs 4,445.36 crore from Rs 2,565.77 crore.

Gross non-performing assets (GNPAs) eased to 16.3 per cent in December quarter from 16.33 per cent in the year-ago quarter, and 16.76 per cent in September quarter.

During the quarter, the bank availed dispensation for deferment of provision in respect of frauds amounting to Rs 238.84 crore.

Accordingly, an amount of Rs 59.71 crore has been charged to profit and loss account during the quarter and the rest Rs 179.13 crore has been deferred to subsequent quarters.

Further out of unamortised amount of Rs 2,284.32 crore up to quarter ended September 30, an amount of Rs 887.57 crore has been charged to P&L account during the quarter and remaining amount of Rs 1,396.75 crore has been carried forward to subsequent quarters. Total amount of remaining provision to be carried over to the subsequent quarters is Rs 1,575.88 crore,” the bank said.

Interest earned during the quarter rose 4.04 per cent to Rs 13,562.69 crore from Rs 13,035.08 crore last year.

Read More

Punjab National Bank(PNB) report profit in Q2

Punjab National Bank (PNB) on Tuesday reported a net profit of Rs 507.05 crore for the September quarter.

The state-run lender had reported Rs 4,532.35 crore loss in the corresponding quarter last year.

Net interest income (NII) for the quarter rose 7.2 per cent to Rs 4,262 crore from Rs 3,974 crore in the corresponding quarter last year.

The bank made Rs 2,928.90 crore in provisions for the quarter, which were 44 per cent higher than Rs 2,023.31 crore provisions made in June quarter but 70 per cent lower than Rs 9,757.90 provisions the bank made crore in the year-ago quarter.

Gross non-performing assets as percentage of total advances rose sequentially to 16.76 per cent in September quarter from 16.49 per cent in June quarter. It stood at 17.16 per cent in the year-ago quarter.

“During the quarter bank has availed dispensation for deferment of provision in respect of frauds amounting to Rs 2580.72 crore. Accordingly, an amount of Rs 645.19 crores has been charged to profit and loss account during the quarter and Rs 1,935.53 crores has been deferred to subsequent quarter,” the bank said.

“Further, out of unamortised amount of Rs 718.38 crore up to June quarter, an amount of Rs 369.59 crore has been charged to P&L account and remaining amount of Rs 348.79 crore has been carried forward to subsequent quarters. Total amount of remaining provision to be carried over to the subsequent quarters is Rs 2,284.32 crore,” the bank said.

Read More

Govt appoints new MD & CEO of PNB

S S Mallikarjuna Rao was on Tuesday appointed the Managing Director and Chief Executive Officer of Punjab National Bank, an official order said.

Rao, 57, currently the Managing Director and Chief Executive Officer of Allahabad Bank, has been appointed to the new post up to September 18, 2021.

"The Appointments Committee of the Cabinet (ACC) has approved the proposal of the Department of Financial Services for posting of Ch. S. S. Mallikarjuna Rao, Managing Director and Chief Executive Officer in Allahabad Bank as Managing Director and Chief Executive Officer in Punjab National Bank, with effect from the date of assumption of office, till 18.09.2021 or until further orders, whichever is earlier," the order said.

The government in August merged United Bank of India and Oriental Bank of Commerce with Punjab National Bank, making the proposed entity the second largest public sector bank (PSB).

Read More

RBI slaps fine on Nine banks due to violating norms

The RBI has imposed penalties on nine commercial banks, including SBI, PNB and BoB, for a host of violations, including delay on the reporting of fraud in the account of Kingfisher Airlines in case of two lenders.

The nine lenders in separate regulatory filings said that the penalties have been imposed on them for delay in reporting of frauds. Public sector lender Punjab National Bank (PNB) said the RBI has imposed a penalty of Rs 50 lakh on it for delay in reporting of fraud in the account of Kingfisher Airlines.

Another state-run lender Oriental Bank of Commerce said that the RBI has imposed a fine of Rs 1.5 crore on it for delay in reporting fraud in the account of Kingfisher Airlines. The aforesaid penalty is required to be paid within 14 days from the date of receipt of the RBI order, the bank added.

United Bank of India and Punjab & Sind Bank said they have been fined 1 crore each by the RBI. State Bank of India (SBI) said the RBI imposed a penalty of Rs 50 lakh on it for non-compliance relating to reporting of frauds. The RBI in exercise of the powers conferred under various sections of the Banking Regulations Act, has imposed a penalty of Rs 50 lakh on the bank for non-compliance with its directions relating to reporting of frauds, it said in a filing.

Bank of Baroda and Federal Bank reported a fine of Rs 50 lakh each on them for delay in reporting fraud in an account.

Corporation Bank and UCO Bank also reported imposition of fines by the RBI for delay in reporting of frauds.

The RBI in a release on Friday had said that it had imposed a fine of Rs 1 crore on Corporation Bank non-compliance with the directions on cyber security framework and frauds classification and reporting.

The central bank in another release on Friday had named seven banks that faced penalties of various amounts for violation of its direction on fraud classification and reporting and opening of current accounts. The RBI slapped a penalty of Rs 2 crore each on Allahabad Bank and Bank of Maharashtra, Rs 1.5 crore each on Bank of Baroda, Bank of India, Indian Overseas Bank and Union Bank of India, and Rs 1 crore penalty on Oriental Bank of Commerce.

A scrutiny was carried out by the RBI in the accounts of the companies of a Group and it was observed that the banks had failed to comply with provisions of one or more of the directions issued by the RBI, the release had said. Based on the findings of the scrutiny, notices were issued to the banks advising them to show cause as to why penalty should not be imposed for non-compliance with the directions.

Read More

PNB reports profit in Q1FY20, net NPAs rise QoQ

Punjab National bank (PNB) on Friday reported a profit of Rs 1,018.63 crore for the quarter ended June 30, 2019 against loss of Rs 940 crore registered in the corresponding quarter of the previous fiscal. 

Provisions and contingencies stood at Rs 2,023.31 crore, down 64.8 per cent against 5,758.16 crore logged in the year-ago period. Sequentially, the numbers droped 79.9 per cent. In the March quarter, figures stood at Rs 10,071.11 crore.

It was a positive surprise from the bank as most analysts had projected loss for the period.  

For instance, analysts at Edelweiss Securities had forecast the public sector lender to report a loss of Rs 905.8 crore while those at Phillip Capital had estimated NII at Rs 4,316.5 crore, down 8 per cent YoY and a loss of Rs 1,006.9 crore.

“Business momentum is expected to be softer (albeit improving). The asset quality performance is likely to show some improvement… That said credit cost will be higher,” Edelweiss Securities had written in a results preview note. 

Gross NPAs increased to 16.49 per cent against 15.50 per cent in the previous quarter. In the year-ago period, the figures stood at 18.26 per cent. Net NPA (non-performing assets) declined year-on-year (YoY) to 7.17 per cent against 10.58 per cent in the year-ago period. Sequentially it rose as in the March quarter, the figures stood at 6.56 per cent.

Basic diluted EPS (earnings per shares) came in at Rs 2.21 against Rs (-) 3.41 in the year-ago period. 

"Bank has reported one loan account in the Power and Steel sector under Borrowal Fraud category to RBI during Quarter II of current FY involving an amount of Rs 3760.62 crore outstanding as on 30.06.2019. The account was already under NPA category since FY2016 and provision amounting to Rs 1,880.44 crore was held in the account as at June 30, 2016. This is a consortium advance of 33 lenders which is near resolution stage under NCLT. The remaining provision in the fraud account will be done by the Bank in terms of extant RBI guidelines," PNB said in its press release. 

Read More

Fraud detected by psu bank against Bhushan Power & Steel

Punjab National Bank on Saturday said it has detected a fraud of₹3,805.15 crore by Bhushan Power & Steel Ltd and has reported it to the Reserve Bank of India.

The exposure of ₹3,800 crore includes domestic exposure of ₹3,191 crore, overseas exposure of $49.71 million at the bank's Dubai branch and $38.51 million at its Hong Kong branch.

PNB said the company misappropriated bank funds and manipulated books to raise funds from consortium lenders.

"On the basis of Forensic Audit Investigation findings and the CBI filing an FIR on a suo moto basis, against the company and its directors, alleging diversion of funds from the banking system, a fraud of ₹3,805.15 core is being reported by the bank to the RBI," the bank said.

The state-owned bank also said that it has made provision of ₹1,932.47 crore against this account.

BPSL is one of the 12 accounts identified by the RBI for insolvency proceedings. JSW Steel has offered to pay ₹19,350 crore to financial creditors, which implies a haircut of around 60% for lenders.

The state-owned bank reported the fraud at a time when it is already recovering from the Nirav Modi scam, where it was defrauded of ₹11,400 crore.

Read More