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HT Photo

Bank consolidation does not mean you lose your money

If your bank is merged with another bank today, you will continue to have access to your deposits and banking services

Earlier this year, five associate banks and the Bharatiya Mahila Bank were merged with the State Bank of India (SBI). The five associate banks were: State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore. News reports suggest that the government is exploring further consolidation of public sector banks. Currently there are 21 public sector banks. 

Recently, social media was abuzz with rumours that government will close nine public sector banks. The disturbing part of the rumour was, it asked customers to withdraw their money from these banks. Thus, it is important to know what this consolidation of banks actually means. 

At a corporate level, merger of banks means merging of banks’ balance sheets, customers and customer databases. For instance, all branches of the five associate banks and Bhartiya Mahila Bank started operating as branches of SBI from 1 April and their customers are now customers of SBI.

After the merger, customers remain account holders, albeit in the merged entity.

The entire process of merger—in terms of technical integration of customer databases, issuing new passbooks and chequebooks—could take a few months to complete. Over this period, some branches could close down, if there are overlaps. 

However, for the customers, it is business as usual. For example, if you were a customer of State Bank of Patiala, associate bank, you can still walk in to your branch for all the services you need. Your deposits remain safe. In case of fixed deposits, the interest rate will continue to be the same till the time of maturity. For savings accounts, the interest rate offered will be of the bank into which the merger has happened. 

If your bank is merged with another bank today, you can continue to use your old-bank’s chequebook for cash withdrawals and payments. 

For internet banking, the online banking portals of the merged banks would cease to exist and you would be redirected to the merged entity’s portal. However, you can continue to use your older credentials (user ID and password) for online banking. These do not require to be changed. 

The IFSC and MICR codes—which are used for online transfer of funds—would change over time, not immediately. These changes would be communicated to the customers in advance. Accordingly, new chequebooks would be issued to the customers with the changed codes and branch addresses if your branch had closed down. 

Once the merger is complete and new codes are effective, you may be required to issue fresh standing instructions for the ECS transactions, such as those for EMIs. 

For existing loans, the terms and conditions—and the interest rate too—continue to be the same as earlier. 

What could change, however, is the personal touch that customers may have been getting in the branches of smaller banks. Staff rotation and transfers are less frequent in those banks, hence you could have had a banker in one branch for fairly long periods. The experience in smaller banks is also different because their branches usually have relatively fewer customers. 

And yet, it can be safely said that when banks merge, the impact on customers is minimal. Your money remains safe and you need not pay heed to random rumours.

Accordingly, desist from forwarding such rumours.

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