Laws Need Changing To Ease Bank M & As

A conscious policy should be formulated to facilitate merger of branches and redeployment of staff, writes J K Mathur

It is necessary to take a fresh look at various provisions of the Banking Regulation Act and other related laws in the wake of the radical changes in the economic environment of the country. Laws must be properly in place to facilitate mergers and acquisitions in the banking sector so that it can reorganise and survive.

What is the past record? About 75 banks have been merged under section 45 of the act since 1960, out of which 16 banks were acquired by SBI and its associate banks. Recent examples are Bank of Cochin and Kashinath Seth Bank merged with SBI, Punjab Co-operative Bank and Bari Doab Bank with Oriental Bank of Commerce, Bareily Corporation Bank with Bank of Baroda and Sikkim Bank with the Union Bank of India.

The decision to merge a weak bank with a strong bank under the Act has not so far been based on commercial considerations. It was imposed more or less as an administrative fiat, facing the acquiring bank with a Hobson