Finally, it was technology that settled the issue for at least four banks — Canara and Syndicate and Indian Bank and Allahabad. While Canara and Syndicate Bank were on the iFlex core banking system, Indian and Allahabad banks used BaNCS, prompting the finance ministry to go for these alliances for a smooth merger.
That left the government with the option to merge six entities that were on the Finnacle CBS platform into one, to create a mega entity, which it realised would be tough to manage. So, it opted to merge three entities each. But even here, there were several calculations at work, including political considerations.
While the government decided to bite the bullet on the banks headquartered in Kolkata, when it came to Bank of Maharashtra, the state elections were a factor that came into play in leaving it untouched, at least for the time being. It may have been a reason for leaving Bank of India and Central Bank of India to operate on a standalone basis, sources indicated. The attachment of the Sikh community to Punjab & Sind Bank meant that the government did not want to push its consolidation and retain the identity of the lender, where the unwritten rule is to have a Sikh chairman or managing director.
But when it came to the six that had to be merged, various permutations and combinations were used to decide on the exact combinations. So, United Bank of India’s strong current and savings bank account (CASA) base of 51% against Oriental Bank of Commerce’s 29% meant that they could complement each other. Similarly, there were geographical considerations too. Punjab National Bank and OBC had a strong presence in the North but were largely missing from the East and the Northeast, where United Bank is deeply entrenched.
PNB’s return to profit paved the way for it to play the anchor in one of the merged entities. In the previous round, Bank of Baroda was asked to take the lead as PNB was bleeding due to a massive NPA pile and the fraud orchestrated by Nirav Modi and Mehul Choksi.
In case of the other three-way merger involving Union Bank, Andhra Bank and Corporation Bank, there are several synergies at work.