FinMin revises letter, scotches PSU bank merger speculation

livemint.com:

MUMBAI : The Union finance ministry has rectified the agenda of a parliamentary committee meeting scheduled for early next year, putting an end to speculation of a potential merger of public sector banks—UCO Bank with Union Bank of India, and Bank of India with Bank of Maharashtra. In a letter addressed to, among others, the bank chiefs of the four PSU banks and Reserve Bank of India governor on Thursday, the finance ministry said that the members of the parliamentary committee would hold informal discussions with UCO Bank and Union Bank, besides Bank of India and Bank of Maharashtra, over the “regulatory mechanism in post-merger scenario".

One of the subjects of the meeting as listed out in the first letter dated 14 December said: “Informal discussion with representatives of Union Bank of India and UCO Bank on rules/regulations framed under Banking Regulations Act, 1949 and other relevant Acts as applicable to them and the regulatory mechanism in post merger scenario." This letter gave rise to speculation that Union Bank, which had just consummated a merger of Corporation Bank and Andhra Bank with itself, was set for another merger with the Kolkata-based UCO Bank. This was, however, put to rest after the ministry’s clarification on Saturday, in which the word “merger" was dropped from the letter.

An executive director at one of the four banks clarified to Mint that there has been no discussion with the government regarding the merger, and the letter was just mis-interpreted by the public. “The parliamentary committee cannot initiate a discussion with the banks on the merger without the government’s involvement.