This refers to “BoB, Dena, Vijaya to merge” (September 18). The government’s decision to merge the three banks comes in the backdrop of relatively better performance, vis-à-vis past few quarters, by the banks in general. The major positive signals that the government rely upon are: a) reduction in non-performing loans in April-June ’18; b) enhanced provision coverage ratio at the end of last quarter; c) healthy proportion of low-cost deposits to total deposits and year-on-year credit growth in August; d) better show by micro small and medium enterprises; e) real recovery of non-performing loans by more than 50 per cent of the annual recovery in the previous year in the first quarter itself etc.
Post amalgamation, the capital to risk (weighted) assets ratio (CRAR) of the merged entity will be better than the same of two of the three as per figures of last quarter. However, the return on assets is marginally negative when the Q1 results are annualised.
A bigger challenge would be integrating the software platform. Different banks use different platforms for their core banking solutions. Though it is possible to integrate the data extracted from one software, either field-gaps and or field-overlap can create data inconsistency. The technical team and domain experts will have a tough job in integrating the data in an error-proof way.
Retaining customer loyalty of the respective banks would be important too. Most regional organisations will have customers, who are sentimentally attached to it. Yet, the real challenge would be integrating the mind of the workforce from bottom to top. The workmen unions and officers’ associations have already raised protest. A better deal for all would be the best solution to address these issues. A win-win situation for all stakeholders would make the government win the mission.
P D Sankaranarayanan Gurugram
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 "Letter to BS: Merger of BoB, Dena Bank, Vijaya Bank a better deal for all")
