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All-women bank’s merger may trigger political war

business Updated: Apr 17, 2016 14:26 IST
Mahua Venkatesh
Mahua Venkatesh
Hindustan Times
All-women bank’s merger

While the Centre is looking for an appropriate merger partner for the Bharatiya Mahila Bank, former finance minister P Chidambaram, who was part of the launch team, said the decision to merge BMB with another bank will be a ‘terrible’ idea.(Sonu Mehta/HT File Photo)

The three-year-old Bharatiya Mahila Bank (BMB) has its days numbered. The Rs 1,000-crore experiment of the previous UPA government has remained a non-starter, and the Modi government is keen to merge it with another public sector lender, sources said. However, the issue could turn into a political war between BJP and Opposition Congress.

While the Centre is looking for an appropriate merger partner for BMB, former finance minister P Chidambaram, who was part of the launch team, said the decision to merge BMB with another bank will be a “terrible” idea.

“I hope the idea is not being killed because it was launched by the UPA,” Chidambaram told HT through a text message, when asked about the current government’s decision.

Soon after the launch of BMB, a majority of lenders, both public and private, introduced their own all-women branches, and even came out with special products for women.

“The uniqueness of BMB was lost soon after its launch as most other banks came up with the same model within their own business space...however, it wasn’t possible for these banks, including BMB, to continue with this model... BMB has customers who are men, employees who are men... so how do you differentiate?” said Ashvin Parekh, managing partner, APA Services.

Top officials of the bank have urged the government to take the final call on the fate of the lender at the earliest, as the uncertainty is impacting business and morale of employees.

“A final decision on the bank’s fate needs to be taken very quickly as reports of the merger is impacting our employees and customers…who will come to the bank, if there is uncertainty,” said SM Swathi, executive director, BMB.

The Banks Board Bureau (BBB), which came into force from April 1, is looking for a match for the lender.

However, senior officials, who have been with BMB since its inception, questioned the decision. “On one hand several new licences are being issued for setting up banks and on the other, this bank’s future seems uncertain..when the country needs more banks especially to handle niche businesses, what is the problem in continuing with BMB?” an official questioned.

Launched in 2013 by former Prime Minister Manmohan Singh, BMB currently has around 56 branches. However, the bank has not been able to make much of a dent in the market. Total advances stood at Rs 446 crore as on September 30, 2015, while deposits amounted to Rs 920 crore.

The bank also offers insurance products for women like Nirbhaya — primarily a maternity cover and Sakhee — targeted at the rural women, besides Komal Kali — a recurring deposit scheme for the girl child. It is running without a chairperson since August.

“We are looking at all options and a decision will be taken soon,” a senior finance ministry official said.

The bank, with zero non-performing assets (NPAs) — loans that do not yield returns — will not have a problem in finding a taker, the BMB official said.

According to earlier reports, the finance ministry was considering a proposal to merge BMB with State Bank of India (SBI), though no decision was taken. When asked about the merger proposal, SBI chairman Arundhati Bhattacharya had said at that time: “I have not been approached on this...I think this is something they are discussing at the Cabinet... Bharatiya Mahila Bank has `1,000-crore capital and their loan book must be Rs 150-200 crore and zero non-performing assets along with very few branches. So it is really a very small entity as of now. So we’ll see.”

Sources, however, said a merger proposal with SBI would be examined carefully before a final decision is taken.