The merger melodrama

The merger melodrama

Nearly 52 years ago, the architects of our new nation had envisaged a robust bank which would have a national character with its offices spread across the length and breadth of the country. This was to be achieved by the amalgamation of the erstwhile Imperial Bank of India and the 10 representative banks of different states. But, this did not take place as a section of stakeholders, almost certainly guided by their personal interests, managed to scuttle a well-meaning consolidation by arguing that the time was not ripe. It was also argued that state-owned banks had a strong regional character and amalgamating them into one big bank would upset the local cultural balance and jeopardize the profitability of these institutions and affect the welfare of the region with these banks. The alternative path suggested led to the creation of the State Bank of India (SBI) and its eight subsidiaries (two subsidiaries were merged later). More than half a century and many a committee later, the State Bank group is still a loosely knit garment for an increasingly difficult financial catwalk. In the bargain, the so-called culturally linked subsidiaries have been losing market share to private banks.

As noted in the famous McKinsey report, the existing structure is dysfunctional in the way they compete with each other with an absence of synergies. Further, the structure has resulted in localized coteries of power that are doing their best to maintain status quo to suit their personal interests. Economic and operational common sense is being thrown to the winds in the name of protecting the regional character of the associate banks, avoiding the creation of a monolith, possible parochialism and subjugation of human resources by the parent, i.e., SBI.

This is a good time to ask some questions from those who oppose the merger of these banks with SBI. Was Sardar Patel guilty of destroying the regional and cultural uniqueness of many a princely state by merging them with India? Is India better off existing as one country or should it have allowed numerous associates to tow along with it in its journey to the future? Is it not a fact that the disparate “socio-cultural" regions are embracing technological advances in education, medicine, communications, etc? Are these regions not being wooed away by modern institutions? If an institution like the Bank of America opened offices in these regions and made its locally recruited officials wear ethnic costumes and speak local languages, would it be a charade, an invasion or an act of cultural preservation?

U.S. Pandey is an officer with the State Bank of Bikaner & Jaipur. This article is an edited version of his post on the blog Comment at