Unions flay merger of public sector banks

The imbroglio between government, banks and employee unions over the merger of public sector banks (PSBs) and associate banks is getting knottier by the day.

Bank employees totalling around 10 lakh have reiterated their opposition to the merger of 28 public sector banks, arguing that such a measure "is unwarranted and undesirable".

C H Venkatachalam, convenor, United Forum of Bank Unions (UFBU), soon after his return from New Delhi where he met Union Finance Minister P Chidambaram and the finance secretary, said mergers would lead to the closure of a large number of existing branches and "render staff surplus. This will endanger the jobs of the employees".

In the Indian context, where public sector banks (PSBs) need to expand more and more, "the merger of banks as proposed now will be highly detrimental and a retrograde step", he argued.

The government's proposal is to merge the 28 PSBs into four or five banks to enable them to become global banks and for doing international business.

"There is neither the need for our banks to become global nor can our banks really become globally competitive banks," he said.

He argued that the total capital of PSBs put together is less than around Rs 12,500 crore. But the capital of a global bank like Citibank alone is around Rs 330,000 crore.

"Even if the PSBs are merged into a single bank, they will not become big enough to compete or be comparable with global banks," he added.

On the assets side also, Venkatachalam compared PSBs with some global banks. For instance, five global giants put together have around assets worth $7.7 trillion as compared to Indian PSB assets of around $300 billion. Therefore, he argued, "We can never become global in size."

Turning to the question of Indian banks going global, Venkatachalam said the total share of Indian trade is less than 1 per cent of global trade and so we have no big role in financing Indian trade in the global market.

He argued that mergers or consolidation always result in job cuts. Moreover, mergers are meant for commercial propositions which do not apply to PSBs since they have social responsibilities; profits should not be the only motive, he added.

A bank's strength is measured in terms of capacity to serve customers, and capacity to cater to the needs of customers, not by the balance-sheet alone, Venkatachalam said.

He said that in India, less than 50 per cent of the population is covered by banking services. If the banks want to increase their market share, they can do so by tapping untapped markets, and via expansion. There is huge scope and space for everyone, he added.

Customer service would also be hit if PSB mergers take place, Venkatachalam argued. For instance, if the merger of associate banks with SBI happens, these associate banks, namely State Bank of Travancore, State Bank of Hyderabad, State Bank of Mysore, State Bank of Punjab, State Bank of Bikaner and Jaipur, State Bank of Saurashtra and State Bank of Indore will cease to exist and only State Bank of India branches will have to cater to the associate banks' customers.

With less number of employees post-merger, satisfactory customer service would not be possible, Venkatachalam added.

Associate banks within SBI have performed commendably across various business performance parameters like cash adjustment ratio (CAR), business per employee, profit per employee, return on assets and net NPA, he claimed.