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Letters to BS: Merger of banks, capital infusion in PSBs is questionable

Neither the timing nor the manner justifies it

Business Standard 

More steps in the offing for timely fraud detection in banks: RBI

This refers to the editorial “Free the banks” (September 2). The merger of 10 (PSBs) preceded by the capital infusion of Rs 70,000 crore in distressed PSBs in quick succession is as questionable as was demonetisation coming hurriedly ahead of GST leaving the latter limping.

Neither the timing nor the manner justifies it. Two years ago, the State Bank of India was saddled with five associated banks; has the problem of bad loans abated there? According to some reports, it hasn’t. A major reason is that merging banks without solving their deep-rooted hurdles — political interference, no proper reward and punishment system for performance assessment, unionisation of officers, fear of investigation against honest but daring decisions and poor work ethics — is like putting the cart before the horse.

Besides, the amalgamation of non-performing assets is very distinct from bringing together the organisational culture of the different banks involved in the merger. In fact, it leads to clash of work culture even when the cultures are perceived as similar. For example, when small banks are tagged with the big ones (as in the case of Punjab National Bank and United Bank), the fear of domination hampers performance.

Lastly, with the finance minister announcing that the mergers will not result in job losses, the advantages of economies of scale will be limited and application of sophisticated technology will result in surplus manpower.

Y G Chouksey, Pune

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First Published: Mon, September 02 2019. 22:05 IST