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Merger of govt banks will not be just on the basis of merit: Rai
NEW DELHI: The proposed consolidation of public sector banks will not take place purely on merit, but will also be influenced by extraneous factors, including the
NEW DELHI: The proposed consolidation of public sector banks will not take place purely on merit, but will also be influenced by extraneous factors, including the political environment, Banks Board Bureau chairman Vinod Rai said on Tuesday.
Rai, who was appointed in February to oversee the overhaul of public sector banks, also said that a key motivation behind the merger of the country’s largest lender, State Bank of India, was to assess the response of the consolidation.
The government kick-started the consolidation process of 27 state-owned banks in June. SBI would be merged with five of its associate banks and Bharatiya Mahila Bank.
Rai told officials of the Central Vigilance Commission (CVC) that one of the reasons behind the government’s decision to merge all the entities was it was a low-hanging fruit owing to similarities in the culture of SBI and its associate banks.
“But more importantly,” he said, this was done “to test the waters; how will social or environment milieu take to the process of consolidation”.
Bank unions have opposed the merger saying it would result in job losses, and went on a token one-day strike last month.
SBI has, however, assured them that there would be no loss of employment after the merger.
The former Comptroller and Auditor General of India (CAG) also said that there are some teams, which are currently working to come up with the combination of banks that should be merged. That would be the “best fits”, he said.
“Unfortunately for the public sector, it is not purely on merit that consolidation will take place,” he added.
Rai had told HT in July that the government would have to take a realistic stand on the ‘consolidation’ of different public sector banks.
“You just can’t make a— I don’t want to take a name — say XYZ bank disappear from say, Kolkata. The entire political establishment will be up in arms... The Indian Bank, if you make it disappear, the establishment in Tamil Nadu is not going to leave you alone,” said Rai.
”You have to ensure that the consolidation process takes place, where you take the unions along with you, but more importantly, the political environment around that area.”
“The work has to be in progress. This (merger of government banks) would be worked out after April 1,” he added.
