Bankers' Club

Earlier since the Government gave its in principle approval for merger of public sector banks, it is a hot topic of discussion among bankers. And specially now after the approval for merger of Bank of Baroda, Dena Bank and Vijaya Bank, a common banker is really concerned.

Bankers are afraid of the mergers because this is going to affect them. Unions of Bank employees are also opposing the decision of the central government to merge public sector banks to make fewer and better banks (See: AIBOC Condemns Cabinet Approval of Merger of Public Sector Banks)

See: Why merger of Public Sector Banks is not easy

There will be benefits of merger but there will be side effects too. Bankers are concerned about the disadvantages of merger of banks to them.

Let’s understand the disadvantages of merger of public sector banks for the bank employees.

1. After merger of public sector banks, there will be excess workforce, which will lead to VRS and further hiring will be stopped or restricted, which will affect the employment.

2. Merger of banks will result into closure of many branches, administrative offices, ATMs, processing centers etc. The excess workforce at some centers will be transferred to far off places.

Read: Charter of Demand for 11th Bipartite Settlement

3. Positions at top will get reduced as there will be lesser number of CMDs/ EDs and GMs. That means there will be slow and delayed promotions in the bank.

4. Different Banks have different culture, systems, processes, procedures and merger will lead to clash of organizational cultures. Employees of larger bank does not give equal treatment to employees of smaller bank in the new and merged bank. This may happen in transfers, postings and promotions or in day to day working. This may lead to discontent among staff and unhealthy working environment which will affect the efficiency of workers. Small banks will will lose their local characteristics.

5. Merger of a weak bank with a strong bank may always not result into a better bank as the weaknesses of one bank may get transferred and the merged entity may become weak. As happened in amalgamation of Global Trust Bank with OBC. Overall profitability may not increase, as envisaged, because losses of the weak bank may eat up the profits of strong bank.

6. AIBOC in its circular stated that Government has broader plans to privatize public sector banks to attract foreign investment citing examples of HDFC, ICICI and Axis Bank.

These are the side effects of merger of public sector banks. Please submit your views in the comment box below.