Banks get ready for merger, albeit reluctantly

Some bankers also feel it is too late to postpone the mergers as they have less than a week to the deadline pti

Some bankers also feel it is too late to postpone the mergers as they have less than a week to the deadline pti  

Process can wait, given the lockdown the country is under, say some bankers

Almost half of the Indian public sector lenders — 10 to be precise, which will be merged to create four banks — are getting ready to amalgamate themselves in an exercise that takes effect from April 1.

The mergers, announced in August last, will start amid an unprecedented nationwide lockdown to fight the rapid spread of COVID-19.

Banking services are exempt from the lockdown, but are operating with minimal staff at branches with curtailed business hours, primarily focussing on essential services such as withdrawals and deposits. Banks are encouraging customers to make use of their digital platforms for transactions.

“The entire focus right now is how to continue the essential services to customers with minimum staff,” said the chief executive of a public sector bank, who did not wish to be named.

“In such crisis times, customer service is the key. Merger can wait for a quarter, at least,” the executive added.

In August 2019, Finance Minister Nirmala Sitharaman announced the merger of 10 public sector banks into four. Oriental Bank of India and United Bank of India will be merged with Punjab National Bank; Andhra Bank and Corporation Bank will be merged with Union Bank of India; Allahabad Bank will be merged with Indian Bank; and Syndicate Bank will be merged with Canara Bank.

According to the plan, only the balance sheets of these banks will be merged on April 1. All the branches of the transferor banks will become branches of the transferee bank. The actual integration of systems and processes of these banks will take time (up to a year). For example, if a customer of Andhra Bank goes to a branch which belonged to Corporation Bank before the merger (and a branch of Union Bank post merger), then the entry would still be made in Andhra Bank’s system. All the branches of Union Bank will have to maintain three separate software systems in the branches. The same is the case with all other merger-bound banks.

‘Logistical nightmare’

Also, the branding of the branches will have to change. The branches of the transferor banks will have to don the brand of the transferee bank. “With limited staff that are operating now and also the lockdown that is in place, it is going to be logistical nightmare to change the branding,” said a banker with a public sector bank.

Some bankers said the issue of postponing the merger was discussed among them informally, but no formal requests have been made to the Finance Ministry.

There are also performance-related concerns of the merged entity since economic activity has almost come to a halt due to the crisis, which will inevitably have a bearing on the bank’s performance.

A section of bankers is also of the view that it is too late to postpone the merger at this point of time since only less than a week is left for the process.

“It will be business as usual after the merger as there is no impact on the customer since only the balance sheets are merged,” said the chief executive of another merger-bound public sector bank.

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Printable version | Mar 28, 2020 5:51:03 PM |

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