In order to make PSU banks in the country competitive on a global scale, the mega merger of ten public sector banks into four will be effective from April 1, 2020.
Notably, finance minister Nirmala Sitharaman last year in August announced the consolidation of 10 public sector banks into four banks.
Here are 5 aspects that bank customers should note:
Banks involved in the merger:
In consolidation of banks, there is an anchor bank and amalgamating bank or banks and the latter gets merged with the anchor bank. Say for instance when there was consolidation in Bank of Baroda in April last year, Vijaya Bank and Dena Bank were the amalgamating banks while Bank of Baroda was the anchor bank.
In the merger, while shareholders of all banks involved in the merger are impacted, it is not the same for retail customers as primarily customers of amalgamating banks get impacted directly.
Banks Merging on April 1:
- Oriental Bank of Commerce (OBC) and United Bank of India (UBI) will get consolidated into Punjab National Bank (PNB), making it the second largest PSB.
- Syndicate Bank and Canara Bank will be merged
- Allahabad Bank will be merged with Indian Bank
- Andhra Bank and Corporation Bank are to be merged with Union Bank of India.
So, here's how would the amalgamation affect the customers or account holders of amalgamating banks:
1. Bank account number, customer IDs will be changed:
As per the Frequently asked questions on merger of UBI and OBC with PNB, "The existing Account No., IFSC, MICR, Debit Card etc. will continue post amalgamation, until further notification. Your existing account in all three amalgamating banks will continue with all its services."
And at a later date you can expect a new bank account number as well as customer ID for bank accounts held with amalgamating banks.
2. Bank Branches and ATMs:
As per the FAQs cited above "There shall be no immediate branch closures in any of the Banks. In future, if there are some closely located branches of the three Banks, they may be merged/shifted with prior notice to our esteemed customers."
So, as of now post the consolidation, customers will gain access to a wider network of bank branches as well as ATMs together with advanced banking technology. But remember here that branch rationalization will occur though may be at a later date.
3. Account details for auto-credits/debits:
As per the earlier mentioned FAQs "All ECS/NACH arrangements/standing instructions for utility payments, Loan EMIs, RD Instalments, Credit Card payments and other services shall function without any disruption to the customer. There is no need to resubmit your mandate."
So unless and until, the accounts of merging entities are seamlessly clubbed with the anchor bank, customers who have given mandate with their banks for various transactions such as auto credit of salary, auto credit of share/mutual fund dividend via ECS or auto debits against various bills will not be required to change their bank account details for such transactions.
4. Credit and debit cards:
Credit card issued by the amalgamating bank will continue to work until the expiry date specified on the card. Customers can even approach the bank for issuance of a new card. In case of debit cards, there shall be no levy of fee, implying in case of Allahabad Bank and Indian Bank debit card holders, they can swipe their debit cards at ATMs of both the banks for free.
5. Fixed deposit and recurring deposit rates:
In case of existing bank RDs and FDs, current interest rate will be applicable until maturity. In case of renewal of fixed deposits, most recent term deposit rates of the amalgamated bank would apply.