Home > Industry > Banking > Banking industry in a fix as merger date for PSBs nears

The banking industry is divided over whether to postpone the amalgamation of 10 public sector banks scheduled for 1 April. While some of the smaller banks want the merger to be pushed beyond the deadline, others want it completed on schedule.

“This is not the opportune time to go ahead with this. It has to be pushed back. Larger relationships will get into problem. More importantly, smaller relationships when they approach a newer regime, even if you proclaim everything remains unchanged, I don’t know how it will be. Due to the current situation, UAT (user application testing) cannot be meaningfully concluded. Even in normal circumstances, merger is a complex, challenging task, and is a work in progress for 12-18 months. Going forward, if the system is looking at loss of GDP of 4% will entail in its trail a lot of NPAs, restructuring, and liquidity requirements," said the chief of a public sector bank.

On Wednesday, the All India Bank Officers’ Confederation (AIBOC), the officers’ trade union for state-owned banks, wrote to the prime minister requesting the government to revisit the merger decision, citing the current lockdown.

Currently, all banks are running with 50% staff to carry out day-to-day operations. However, other banks are confident of implementing the process by 1 April. They said their financials will be affected if deadline is pushed.

“In our case, if we postpone it, it will create more problems. What can be done is slowing down the pace. We have done financial due diligence based on 30 September. I don’t have to publish my balance sheet as on 31 March. I need to get it approved by the anchor bank board. If I publish my balance sheet, new financial due diligence needs to be done. Only signboards and other issues will have to be done at a later date. Generating common data, surrendering GST, TDS harmonization is already in place," said the head of another large PSB.

“We have not received any communication from the government about the change in decision. We believe we are ready with the amalgamation. We are going to function in our own premises. Only the boards will be changed. The people of other banks can come over. Transaction will be done by our own bank. All the back end work is also going on as per schedule," said the chief of a third bank.

Last year, the finance ministry had announced the consolidation of 10 public sector lenders into four bigger and stronger banks. Punjab National Bank (PNB), Oriental Bank of Commerce (OBC) and United Bank will be brought together to form the second largest public sector bank, after State Bank of India .

The other merger will be of Canara Bank and Syndicate Bank, which will make it the fourth-largest public sector lender, while Union Bank of India will be merged with Andhra Bank and Corporation Bank to build India’s fifth-largest lender. Indian Bank will be merged with Allahabad Bank to make India’s seventh-largest PSB.

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