The consolidation exercise among public sector banks may not be an easy one with unions and employees voicing their concerns.
Barely two days since finance minister Arun Jaitley announced the proposal to have “strong banks rather than numerically large numbers,” unions have threatened to resort to strikes if the process is kicked off. According to unions, if the government’s plan was to avoid “large number” of banks, why did it issue licences to companies to set up payments and small finance banks?
The consolidation exercise could bring down the number of public sector banks to about six from the current 27, banking sources had earlier told HT.
Issues such as mergers of weak banks, chalking out a career path for the chairmen of the merged banks, cultural fitment of lenders will also have to be dealt with, analysts said, even though the government seemed confident of the merger exercise.
Addressing a press conference at the conclusion of the second edition of the Gyan Sangam — a two-day offsite for public sector banks and financial institutions — on Saturday, Jaitley had said that consolidation in the banking sector was discussed at the meeting, and bankers themselves have suggested that an expert group should be set up soon to look into the issue. The panel will closely work with the Banks Board Bureau (BBB) to identify the right matches for consolidation. The BBB is set to be put in place by April 1, 2016.
“The main problem that public sector banks is facing today is that of rising non-performing assets (loans that do not yield returns).. how will this get resolved by merging banks? The focus should be on recovery while ensuring that no further slippage is allowed,” CH Venkatachalam, general secretary, All India Bank Employees’ Association, told HT.
Around 800,000 people are currently employed with different public sector banks.
“There is no need to merge banks and even if this (issue) had to be discussed, all stakeholders need to be taken into confidence and no unilateral decision will be supported,” said Ashwani Rana, vice-president, National Organisation of Bank Workers, an affiliate of the Bharatiya Mazdoor Sangh.
NPAs for scheduled commercial lenders have crossed `8 lakh crore, and almost all banks have seen their profits drop sharply during the last quarter, especially with the Reserve Bank of India asking them to clean up their balance sheets by March 2017.