Mega bank consolidation: Will April 1, 2020 deadline be met?

Though the bank merger has been approved by the Union Cabinet and a public announcement made, on the ground, there are a number of steps to be gone through.
Mega bank consolidation: Will April 1, 2020 deadline be met?
Mega bank consolidation: Will April 1, 2020 deadline be met?
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Months after the grand announcement of merger of nationalised banks to just 10 large banks, there are apprehensions among many stakeholders if the April 1, 2020 deadline will be met as the progress so far appears to be lackadaisical. Though the decision to merge the banks has been approved by the Union Cabinet and a public announcement made on the same, on the ground, there are a number of steps to be gone through. The boards of individual banks have to pass the appropriate resolutions and the scheme of amalgamation has to be passed by the Parliament. For this, the members of Parliament have to be provided with the details 30 days prior to the day the Parliament discusses and approves it. It is not before March 2 that the Parliament is expected to convene. That would be cutting it too fine.

More significantly, the IT systems in the banks have to be merged, which is very challenging. Though most banks use the same Finacle software developed by Infosys, each bank may be using a different version and if these are not resolved in time, it could become chaotic and the customers could suffer. Similarly, the processing of applications for loans has to be streamlined to avoid delays, again a customer-centric situation.

For the record, as per the announcement made by the Finance Minister Nirmala Sitharaman last August, United Bank of India and Oriental Bank of Commerce would merge with Punjab National Bank, and Syndicate Bank will merge with Canara Bank, while Allahabad Bank will be absorbed by Indian Bank. Similarly, Andhra Bank and Corporation Bank are to be consolidated with Union Bank of India.

Vijaya Bank and Dena Bank had already been merged with Bank of Baroda, but there are reports, the process has been far from smooth though 10 months have elapsed after they were formally merged.

Meanwhile, a report says, the Prime Minister’s Office (PMO) has asked these banks to send some information; NPAs, capital requirement, credit growth and cost savings on account of the mergers are some of these details sought by the PMO.

The employee unions in all these banks have opposed this merger move. Some are calling the very decision on merger illegal.

There are experts who feel this decision to merge the banks was ill-advised, particularly when the Indian economy is passing through a tough phase. The Finance Minister has ruled out any change in the merger plans.

There are some peculiar issues being thrown up as well, according to experts. Canara Bank and Syndicate Bank are both based out of Karnataka and would have maximum number of branches there. Merger will lead to several branches being closed down and the consolidated entity will face a number of HR-related issues. It could happen with the other mergers as well.

The merger of smaller sized banks into large ones has been mooted by the Reserve Bank of India which feels that world class banks can be created by merging these smaller banks with the larger ones.  

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