Indonesia is set to finalise a mega bank merger in May this year by combining four state banks under one holding company.

The move is aimed at creating a strong lender in the country that will support the growth of lending business and infrastructure in the country.

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Indonesia bank merger: Details

The four banks which will be merged together are Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN).

Indonesia’s state-owned enterprises minister Rini Soemarno told Reuters that the government will set up a state-owned financial company called PT Danareksa, which will serve as the holding company for the four banks.

Local pawn business PT Pegadaian and small business lender PT Permodalan Nasional Madani will also operate under the holding company.

If the deal materialises, PT Danareksa is estimated to handle nearly 40% of Indonesia’s banking assets.

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Indonesia’s deputy minister of state-owned enterprises Gatot Trihargo told the news agency that the holding company will be able to raise funds more efficiently. Additionally, it is also expected to bolster its competitiveness against privately-owned lenders.

Discussions to merge the state-owned banks in Indonesia were on for multiple years. Proposals of direct mergers and combining their Islamic banking units were also under consideration.

Currently, the ATM and electronic data capture (EDC) operations of all the state-owned banks in the country are carried out under one umbrella, called PT Jalin Pembayaran Nusantara.