The Central Government's decision to merge 10 public sector banks into four larger entities would increase risks and will not resolve the bad loan problems faced by these lenders, said All India Bank Employees' Association (AIBEA). The association is protesting against the move, alleging that the merger would force several branches to close down and impact customer services in the remaining branches.
"While public sector banks made a combined gross profit of Rs 1,50,000 crore (Rs 1.5 trillion) for the year ended March 31, 2019, because of provisions towards bad loans, etc amounting to Rs 2,16,000 crore, they ended in a net loss of Rs 66,000 crore. Can anyone believe that their merger will result in recovery of the huge corporate bad loans? Rather, as we have observed after the merger in SBI, bad loans have gone up. These banks now face the same risk," said C H Venkatachalam, general secretary, AIBEA in a statement.
The closure of branches would mean a larger number of customers will be forced to go to fewer branches, impacting banking services severely, as the customer population per bank branch will increase, Venkatachalam said.
The number of bank branches has grown to 90,000 today, of which 40,000 are in rural and semi-urban areas, which were earlier neglected. The merger will also cut into employment opportunities as the intake of staff will reduce.
"We have seen after the merger in SBI that 7,000 branches were closed down. In this proposed merger, branch closure will be much higher. It will be unwise to reduce the branches in the country when what is required is expansion, not amalgamation," Venkatachalam added.
The merger is a diversion from the economic crisis, he alleged. The real agenda is to help the corporates. Big banks will tend to cater to big corporate customers and ignore the common man. This will defeat the social orientation and objectives of nationalised banks.
"The argument that the merger will make our banks bigger and globally competitive is a mere myth. Even if all our banks are merged into one entity, the capital base would be around $4 billion whereas most global banks operate with capital base of $60-$80 billion," Venkatachalam said.
He added that larger banks come with larger risks as they would give bigger loans. It would also become more difficult to monitor bad loans and frauds, he said, adding that Punjab National Bank, as a single lender, could not realise that Nirav Modi was cheating it for years. What India needs is strong and people-oriented banks, not necessarily big banks.
AIBEA will oppose the closure of the six banks and will shortly launch agitations and strikes, Venkatachalam asserted.