Bank merger India 2019: Cheque books, IFSC code, loans, fixed deposits and other key FAQs answered (2024)

Reported by ET Now Digital

Updated Aug 31, 2019 | 13:59IST

What happens to bank accounts when banks merge?

The savings bank accounts, current accounts and other accounts are largely affected after the bank merger. The account holders will be required to replace the existing passbooks with the new passbooks once the merger process is completed. The government has ordered all the banks involved in the merger to ensure that there is no disruption in the banking services during the course of the merger.

What will be the impact of the bank merger on cheque books?

With the upgradation of bank accounts, the existing cheque books will also be replaced by the new ones after successful completion of the merger process. However, the banks are free to decide whether all the products of the unified bank will carry the same brand label or each of the banks will continue to operate with the same brand name as earlier.

Will the IFSC of banks change after the bank merger?

The Indian Financial System Code (IFSC) of the different branches of the merged banks are likely to be affected. There will not be an immediate change in the IFSC, as of now, however, the modifications in the IFSC will come into effect after the merger process is over.

What will be the impact of bank merger on credit, debit cards?

Credit, debit cards issued by the separate banks to the customers may remain the same as to replace millions of credit, debit cards, banks willincur a large sum. However, the new credit, debit cards issued by the unified banks may carry an altogether new branding. The decision with regard to the operationality of the credit, debit cards will be made public by the banks, if there is any modification.

How will the bank merger affect FDs, RDs?

With the amalgamation of the banks, there is a substantial effect on banking products such as fixed deposits, recurring deposits, etc. The prevailing FDs and RDs will ultimately get updated in the unified system of the merged bank. The interest rate differential between theseparate banks is likely to be rationalised post-merger.

Will there be a change in loan rates after the bank merger?

Similarly, the effective loan rates on various credit facilities such as home loan, vehicle loan, education loan, personal loan and the gold loan will be revised accordingly after the completion of the bank merger. Users are likely to receive the modification via official communication from the bank's end.

How shareholders of respective banks will be impacted after the bank merger?

The shareholders of all the respective banks will surely be impacted. The extent of the impact can be ascertained only after the banks decide the share-swap ratio for the merger process. The share-swap ratio, amalgamation of equity assets and other market-related modifications are religiously taken care by the advisors appointed by the government or on the basis of an expert panel.

Which banks got merged in 2019?

The government announced the merger plan of Dena Bank and Vijaya Bank with Bank of Baroda in 2018. Only after getting the approval from various regulatory authorities, the merger came into effect from April 01, 2019. The merged entity -- Bank of Baroda-Dena Bank-Vijaya Bank -- became the second-largest PSB which will be replaced by the consolidation of PNB-Oriental Bank of Commerce-United Bank of India.

Bank merger 2019: Full list of banks which are proposed to be merged

The government has proposed a plan to merge 10 PSBs into four larger banks. Under the said plan, Oriental Bank of Commerce and United Bank of India will be merged with Punjab National Bank to form the second-largest PSU bank with a consolidated branch count of 11,437. Canara Bank and Syndicate Bank will be merged to form the fourth-largest PSU banking entity.Andhra Bank and Corporation Bank will be merged with Union Bank of India to constitute the fifth-largest PSU banking unit. Indian Bank will be consolidated with Allahabad Bank to formthe seventh-largest public sector bank.

What to expect if your bank goes for a merger?

The complete process of the bank merger may take several months up to a year as it includes a number of due diligence, regulatory approvals from SEBI, RBI. Meanwhile, banks also appoint respective advisors to guide them through the merger process, plan the merger framework, etc.

What is a bank merger?

Bank merger is a process with which the operations of two or more banks, be public sector or private sector, are joined together. After the bank merger, the merged banks can either continue to operate with the same brand name or can replace it to reflect a unified brand name.

Why do banks merge?

The decision of merging the banks is entirely dependent on the prevailing conditions inside the bank and amid the banking industry as a whole. Experts have praised the recent mega bank merger decision which will create four larger PSBs. "A key consideration for the merger has been technological inoperability within the merged banks. The consolidation will aid economies of scale for these banks, resulting in improved cost of funds and operating efficiency. Nonetheless, merger-related issues including HR/IT related synchronisation, branch rationalisation, and realigning of NPAs could impact interim profitability," said Mona Khetan.

Which public sector banks will remain independent?

The government has not touched six public sector banks while announcing the 10 to 4 PSU banks merger plan. Public sector banks including Bank of India, Central Bank of India, Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab and Sindh Bank will continue to operate independently as earlier.