With reference to "Why merge public sector banks?", Subir Roy has succinctly explained the futility of the current merger process evident in the banking sector. The Reserve Bank of India has surprisingly remained silent on the issue.
The merger, no doubt, puts the merged entities in the bigger league tables in terms of total business (deposits and advances). But the only benefit for these is they would become eligible to participate in big-ticket loans either single handedly or joining with a few other similarly sized banks. That is only according to the prudential requirements - an international banking practice followed in large exposures. There is no declared guarantee of operational or cost efficiency for merged entities. The best thing a person in charge of such entities can do is to speak the truth. Can we still stop the merger decisions? No, but the government may think twice before putting forward further merger proposals.
The writer ends his article with a suggestion that a few public sector banks could be allowed to have a natural death or privatised. The present government is not timid but there are big limitations to pursue strategies suggested by the writer. Indira Gandhi nationalised 22 banks in two instalments due to which the banking sector, the RBI, the government and more so the customers have been paying a big price.
K V Rao, Bengaluru
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