Sunday, April 2, 2017

News: Merging of State Bank of India with its Associate Banks

While the Big bank merging; what’s my views!! 

 Year 2017, April 1 – it was not the fooling news regarding merging of State Bank brands all around India including our familiar and most competent and trusted bank, State Bank of Travancore. 
The Government the merger of State Bank of Bikaner & Jaipur (SBBJ), State Bank of Mysore (SBM), State Bank of Travancore (SBT), State Bank of Patiala (SBP), State Bank of Hyderabad (SBH) and BMB.


The Management and the so called experts behind this merger are claiming that the Brand, State Bank of India will enter in to the group of world’s biggest banks in terms of Turnover and Capital and said that it has joined the league of top 50 Banks globally in terms of assets following the merger.
Further, merger or acquiring of these banks to the State Bank of India (SBI) will help the SBI to cut down Overhead expenditures up to stationary expenditure itself.  And they believe that they can reduce the huge amount of manpower investment i.e. employees in the coming year.  In an immediate conclusion, all have to accept the advantages claimed by the so called experts.

Unfortunately, I have notice some points which cannot be that much advantageous to all:
In this context, they are already in process of VRS for the employees.  It is understood that they are not going to employ more people on their permanent role and will encourage the contract based employees similar to new generation banks.

The Bank Management will have challenges related to staff integration and rationalization.  Since few of the employee unions are against this merger due to their insecurity and doubts and Management will have to find more time to regain their trust and confidence. 
Have you ever noticed; even though there is a SBI branch on your village town, more people are depending on SBT of the same town.  It means that the special attention or customer care they were enjoying was far better than the big bank SBI.  In one word: Merger will affect regional flavour and will end regional focus.

We have recently noticed that SBI has kept the separate account or practicing of keeping a separate book for long repayment defaulters or doubtful debtors to avoid continuous comments from stack holders and poor bottom line performing figures due to NPAs. 

Different logos of State Bank brands to be considered as a tactics of ‘Product differentiation’ which always help to obtain more Customers.  Now Customers are having one Brand of SBI and if they are not treated well or not satisfied, SBI will easily lose their Customer base which has come through this local brands like SBT and other. 

Becoming India’s Big Bank, SBI will shift their concentration to Corporate Customers which will have adverse effect on their Personal Banking outlook.  

As our Govt. is promoting Digitalized Economy, we require more banking competition rather than more banking consolidation. In other words, it needs more banks rather than fewer banks which can penetrate to each and every corner of our country.

Conclusion:

Merger should be carried out with right banks for the right reasons. Nonperforming shall not be the only reason for merger. Now that the move has been initiated, the bigger challenge is consolidation in the rest of the banking system.  The consolidation of Public Sector Banks should not have reason to lose the customer base since the lack of competition between PSBs will definitely benefit the Private Sector Banks.



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