How the PSU bank merger that comes into force on April 1 will impact you

PSU Bank merger: You'll have to take stock of your cheque books, passbooks, IFCS, ECS mandates and other things once you start dealing with the new entity

Change is inevitable. And this seems to be true for customers of eight banks--Vijaya Bank, Corporation Bank, Andhra Bank, Syndicate Bank, Oriental Bank of Commerce, United Bank of India, Allahabad Bank and Dena Bank--whose merger comes into force on April 1. If you are a customer of any of these banks, there are a few things you should know, and some action you should take, as cheque books, cards, Indian Financial System Code (IFSC) and Magnetic Ink Character Recognition Code (MICR) change.  

Chequebooks: Your first step will be to gather your old cheque books and passbooks of the merging bank (MB), and keep them handy. By this time the new bank or the anchor bank (AB) must have already issued new cheque books and passbooks, and for some MBs the original issuing bank's facilities will become inactive, come April 1. For instance, for cheque books issued to customers of Oriental Bank of Commerce and United Bank of India, which are being merged with Punjab National Bank, will be valid only till March 31, as per their websites. But with some banks, customers will get some more time. M Krishnamachary, general manager & head–integration management office, Bank of Baroda, says, "Reserve Bank of India has granted us special dispensation to continue with the old cheque books banks till 30 June 30." If you have an account with Syndicate Bank, you can use your existing cheque book till June 30. 

An Indian Bank official says, "Customers may continue to use existing cheque books till they are exhausted or for another six months (till August 31), whichever is earlier." In short, different banks have different dates, so find out which applies to you. 

Your action: If you have issued any post-dated cheques, you will have to monitor them. It’s better if you iron out some of these issues beforehand. This means you will have to recall the post-dated cheques and issue new ones. Also keep your passbooks and old e-statements handy, to prove records of funds, in case there is a technical glitch in the integration process. Also, to get a personalised cheque book you will have to contact the AB via its various channels.  

Account numbers, IFSC code, MICR Code: With some banks account, numbers have not changed, only the IFSC codes have. For instance, with Union Bank of India, where technical migration is already over and there is no change in account number, only the IFSC code has changed. In the past, some banks used account mapping for ECS. This means that the bank got in touch with the entity (utility bills, home loan company, systematic investment plan) you have set the ECS for, and matched their ECS in place of the old ECS.  With some banks, like Bank of Baroda, there has been a change in the customers’ account number, but a mechanism has been put in place to translate the old account number to the new, which enables customers to use their old account number and any remittances received therein will automatically flow into the account with a new number. Every bank has migrated differently so it's best to check with your bank what has changed and what hasn't.  

Your action: More often than not, it falls on you to cancel the older ECS relationships, create a new one, and make changes in your bank mandates accordingly. You will also have to update the banking details recorded in your other financial relationships, like a life insurance policy, income tax account, and provident fund account.  It's better to check with your billers and mutual fund house, if you need to take action or whether the biller/fund house takes care of it. Krishnamachary says, "As a matter of prudence, we've requested customers to update their mandates." 

Cards: With most banks, customers can continue to use their old cards till expiry, following which the new bank's cards would be issued.

Loans: Borrowers needn't worry. Sameer Jain, managing partner, PSL Advocates & Solicitors says, "A home loan availed from a bank is by its very nature is a form of contract. Hence, the terms of the contract subsist even in the event of a bank merger."  This also means the interest on these home loans will remain unchanged. Adhil Shetty, CEO, Bankbazaar explains, "In most cases, this rationalisation has already taken place as part of the merger. So, the rates and terms and conditions of the MB and the AB have converged to a common point over the past one year, and there’s no difference, especially in terms of the external benchmark lending rate." The repo-linked home loan has spread over the EBLR fixed in the agreement. Even after merger, it would remain the same. However, if your loan contract has a review clause, the new rate of interest by the acquiring bank could apply.  Shetty says, "In case of Marginal Cost of Funds Based Lending Rate (MCLR) loans, the interest would be reset at the end of reset period selected by the borrower. In case the loan is on base rate, they will be reset to the base rate decided upon by the merged entity. Customers will get an opportunity to move to EBLR loans during the merger. " 

Your action: Banks do not like losing their customers. So if you have an MCLR loan you can actually negotiate with the bank when it is time to reset, if you think the new terms are unfair. And, if still unhappy, there are many others offering loans.

Fixed deposits: FDs are contracts, and it is not possible for banks to change the rate mid-way. If you are locked into an FD, you can continue till maturity on the same interest rate even if the deposit rates of the merged entity are higher or lower. Shetty says, "However, exceptions may be made in case of high-value deposits."

There's no doubt this change will cause some level of pain. Customers will have to be mindful and take the actions suggested above, right from getting new cheque books, to changing mandates to changing net banking and dealing with other operational issues in the short term. But the most important question to ask is if you want a long-term relation with the new entity. The truth is that internal systems and procedures followed by the old bank and the new will be different. You might need time to get used to the new experience and procedures. Moreover, there will be organisational and cultural issues too, so expect some changes in one-on-one culture at the branch level too. 

What will happen to your salary account? 

• Your existing salary accounts will continue to function post amalgamation
• Inform your institution of the new IFSC codes for all future remittances, especially in case your organisation maintains an account with other banks
• Your debit card continue to work till expiry
• You will get access to a wider array of products and services at an expanded network of branches and ATMs

Source: Bank websites