Nifty99000 100%

Sensex99000 100%

Article rating: 4.0
Article rating: 3.7
Article rating: 5.0
Article rating: 4.0
Article rating: 4.5
Article rating: 3.8
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating
Article rating: No rating


Employees should be kept on board during bank mergers: SBI

Author: IANS/Saturday, August 26, 2017/Categories: Banking & Financial Services

Employees should be kept on board during bank mergers: SBI

New Delhi - In the backdrop of the government approving constitution of an alternate mechanism to oversee proposals of bank mergers, State Bank of India Managing Director Dinesh Khara said the employees must be kept on board to alleviate their concerns during the process of consolidation.

"If we start looking at bank mergers from human angle, what is required is that the principal bank will have to address concerns of its own employees and also those of the entities getting merged. There are anxieties in terms of seniority issues and dislocation. If addressed objectively, human issues get addressed well. During the course of journey employees should be kept on board, else anxiety keeps on growing," Khara said.

The mechanism approved to be set up to oversee public sector banks' (PSBs) mergers, will give an in-principle approval to proposals brought by banks. Once the approval is accorded by this structure, the bank boards will deliberate on considerations, including profitability. 

"Merger invariably involves pain, but eventually leads to gains in terms of efficiency parameters, optimising structure, leveraging branch network and improving treasury yields. The journey involves a bit of stress in the sense that the banks need to be aligned. Consider the fact that it will benefit in terms of credit scale and operations efficiency. Merger yields gains, but over a period of time, not in a quarter or so," he said.

Khara said that the pain of banks needs to be addressed for which the options are not many. Thus, consolidation is a good option if banks relatively of the same size are merged.

"The pain of banks having higher stress needs to be addressed. Options are not too many. But if it gets addressed by relatively stronger bank merging with relatively weaker bank -- not totally weak -- it will have benefit of risk management system. The better practices of relatively stronger bank get applied to the relatively weaker bank," he said.

"If such a merger is attempted, in initial case, banks may feel pain in terms of increased provisioning, but they will be able to pass on better assessment skills, which will create value to the book. Eventually the interest is in gaining vitality," he added.

The Managing Director said that however the banks should have the strength to withstand the initial stress.

"This kind of reorganisation is happening, it's a good way to merge. The only thing is that the entity in which the weaker bank is getting merged, it should have ability to withstand stress," he said.

He added that any timing for merger would be good, provided there was managerial bandwidth to take care of the increased provisioning. 

"When it comes to recognition of stress in the system, there are various norms. Both banks will have to align their books. In the process both banks could be at different provisioning level. If the stress is recognised, it is making the bank future ready," he said.

Khara said that if the banks are in the same region, they would be catering to the same kind of customer base. 

"They will be in a better position to administratively equip themselves to understand the customer. In different geographies, non-performing asset (NPA) levels are different. The bank understands local processes better and accordingly develops mitigation measures. In similar geographies, they would be able to reap economies of scale and work out the processes," he said.

Print Rate this article:
No rating

Number of views (499)/Comments (0)

rajyashree guha


Other posts by IANS
Contact author

Leave a comment

Add comment



Ask the Finapolis.

I'm not a robot
Dharmendra Satpathy
Col. Sanjeev Govila (retd)
Hum Fauji Investments
The Finapolis' expert answers your queries on investments, taxation and personal finance. Want advice? Submit your Question above
Want to Invest



The technical studies / analysis discussed here can be at odds with our fundamental views / analysis. The information and views presented in this report are prepared by Karvy Consultants Limited. The information contained herein is based on our analysis and upon sources that we consider reliable. We, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and we are not responsible for any loss incurred based upon it. The investments discussed or recommended in this report may not be suitable for all investors. Investors must make their own investment decisions based on their specific investment objectives and financial position and using such independent advice, as they believe necessary. While acting upon any information or analysis mentioned in this report, investors may please note that neither Karvy nor Karvy Consultants nor any person connected with any associate companies of Karvy accepts any liability arising from the use of this information and views mentioned in this document. The author, directors and other employees of Karvy and its affiliates may hold long or short positions in the above mentioned companies from time to time. Every employee of Karvy and its associate companies is required to disclose his/her individual stock holdings and details of trades, if any, that they undertake. The team rendering corporate analysis and investment recommendations are restricted in purchasing/selling of shares or other securities till such a time this recommendation has either been displayed or has been forwarded to clients of Karvy. All employees are further restricted to place orders only through Karvy Consultants Ltd. This report is intended for a restricted audience and we are not soliciting any action based on it. Neither the information nor any opinion expressed herein constitutes an offer or an invitation to make an offer, to buy or sell any securities, or any options, futures or other derivatives related to such securities.

Subscribe For Free

Get the e-paper free