One's relationship with one's bank is one of the most difficult relationships to change. And now with automatic bill payments, EMIs, or equated monthly installments, on auto-pilot and systematic investment plans linked to bank accounts, a change in your bank means a fairly big change in your financial life.
But sometimes you don't go to change, it comes to you.
Customers of Bank of Rajasthan (BoR) may soon be going to the local branch of ICICI Bank. But changes in the life of BoR customers will be deeper than a change from a blue logo to an orange one, as customers of other Indian banks that have been taken over in the past 10 years have discovered.
Takeovers and mergers happen either due to strategic reasons, as was the case of the merger of Centurion Bank with Bank of Punjab and then of the combined entity of Centurion Bank of Punjab and Lord Krishna Bank before getting swallowed by HDFC Bank Ltd in 2008, or due to a bankrupt bank getting bailed out by another bank, as Global Trust Bank Ltd was acquired by Oriental Bank of Commerce.
Whatever the reason, change may come in two forms. One, if you are customer of the bank. Two, if you are a shareholder.
For savings account holders of the bank that has been taken over, life changes little in terms of the interest on the deposit. Since the Reserve Bank of India has capped the interest rate at 3.5 per cent per annum, this part of the relationship remains the same, unless the amount runs in crores, where the acquiring bank can renegotiate the rates.
"Old terms continue, and acquiring banks have always honoured the acquired bank's depositors," said KJ Udeshi, chairman, Banking Code and Standards Board of India.
What do change are the associated services and fee structure.
For instance, the minimum balance requirement of BoR (Rs 1,000) is one-tenth of ICICI Bank's Rs 10,000. So BoR account holders may find themselves nudged to a higher limit.
In most cases, the acquiring bank gets in touch with you for formalities of new account numbers and cheque book. More sticky are issues around post-dated cheques already issued.
"Since the old entity ceases to exit, the customer cannot use the old cheque book. If he has issued any post-dated cheques, he will have to take care," said CS Jain, head, personal banking group, IDBI Bank Ltd.
If you are a shareholder, even though you may be "small", when you buy shares you agree to take the risks associated with running a business. So if the shares of the acquired bank are valued at zero, such as those of Global Trust Bank and of Nedungadi Bank were, you get nothing. But if it has been a strategic merger, you may actually do very well.An investment of Rs 1 lakh in Centurion Bank in 2003 would be worth more than Rs 8 lakh today. And a similar amount in Bank of Punjab would be worth Rs 9.5 lakh-plus.