Are IOB, UCO Bank Merged with CANARA Bank??

Dear Sehpaathians

The market has been filled with reports of bank mergers in the last weeks. At a time when banks have been posting huge losses, chances of consolidations looks even higher. UCO bank has a very strong presence in Eastern India where as IOB has a very strong presence in Southern India. It has been said that these banks could be the next in the list of consolidation with their mergers on the wishlist of the government. The banks have been proposed to be merged with CANARA bank.

In an interview newly formed Banking Board Chairman Sh. Vinod Rai advocated of reducing the number of Public Sector banks from 27 to just 6. Taking clues from statement of Sh. Vinod Rai Sir, we can say that the banking consolidation is very near. It will start with State Bank Associates and Bhartiya Mahila bank and will then take up small and weak banks. He said “Read more at:”

In cases of IOB and UCO bank it must be noted that banks have recently gone technological changes in the banks and has been posting losses for the past many quarters. Recruitment has been kept on hold at IOB following their bad asset quality and less than required capital. NET NPA of both these banks is expected to cross 12-13% this fiscal, which will make things even difficult for all the banking industry together.

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What is the Difference between Net NPA and Gross NPA

Suppose a customer has 2 loans with a bank. One personal loan and another vehicle loan. Say personal loan has become an NPA, but vehicle loan is being paid properly. However in the bank books the personal loan will become a NET NPA where as Vehicle loan which was a standard asset will become a GROSS NPA.
Banks need to do provisioning on NPA from their profits, which if done more, hit the bank profits heavily. This is the primary reason why banks have been redeeming huge losses.

Why banks have began to show Losses:

In the 2nd quarter of the year, RBI found some mistakes in bank’s NPA declaration system. RBI came out tough on the issue and came up with fresh guidelines on NPA. Earlier suppose a customer had loan from 2 banks, say IOB and UCO bank. The customer has made one loan NPA where as other is being regularly paid. NEW RBI DIRECTIVES SAY THAT BOTH THESE LOANS NEED TO BE CLASSIFIED AS NPA. There were some problems with Consortium advances. Some banks showed advance NPA where as other banks were showing it as standard Asset.

The new directives resulted in huge provisioning on account of NPA’s. To make things worse RBI directed banks which had mistakes in their system to do the provisioning from the day 1 when the loan became NPA rather than the day when bank called it an NPA (after the directives came). In some cases banks were seen doing a 100% provisioning for BAD assets.

So here is the information we have for you now. IOB and UCO bank are next in the list who are being called in by the government to discuss merger with CANARA bank. The practice is expected to be completed in the current financial year.

FAQs:
1. Is UCO Bank merged with which bank?

The merger resulted in 10 Public Sector Banks pooled into 4 Public Sector Banks. However, IOB, Bank of Maharashtra, Punjab and Sind Bank, Bank of India, Central Bank of India and UCO Bank, which are region-centric, will remain as independent entities.

2. Which bank merged with whom?

The banks that were merged include Punjab National Bank, which merged with Oriental Bank of Commerce and United Bank of India; Canara Bank’s takeover of Syndicate Bank; Union Bank, incorporating Andhra Bank and Corporation Bank; and Indian Bank, which merged with Allahabad Bank.

3. What did RBI announced about UCO Bank?

Public sector lender UCO Bank has received the Reserve Bank of India’s (RBI’s) approval to open a special vostro account with Gazprombank of Russia for trade settlement in Indian rupees.

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