Hours after Finance Minister Arun Jaitley announced the merger of three state-owned banks on Monday, Dena Bank employee Vinay Prakash started receiving phone calls from his juniors. Every query stemmed from an innate fear of job loss.
The Centre’s decision to amalgamate Vijaya Bank, Dena Bank and Bank of Baroda in order to consolidate stressed financial assets has left most, if not all, junior employees of the three banks worried.
“I received at least ten calls at night asking me as to what will happen. The senior officials knew about it but it is only natural that the others worry. Bank mergers in the past have seen jobs being lost but this is time there is certain assurance for the better,” said Prakash.
The senior bank employee draws his assurance from what Jaitley said during the news conference on Monday. “No employee will face any service conditions which are adverse in nature. The best of the service conditions will apply to all of them,” he said.
However, the announcement does not seem to have provided the much needed affirmation, especially to the ones at the bottom of the hierarchy.
Ram Chauhan, an ATM guard in Delhi, does not understand the financial jargon behind the merger but has seen jobs being lost in the past when State Bank of India merged with its subsidiaries.
“One of my colleagues told me that the three banks will become one. I don’t know what that means but in the neighbouring State Bank of Patiala ATM, the guard lost his job as the ATM closed down after the merger,” said Chauhan.
The fear of job loss was also reiterated by the general secretary of the All India Bank Employees Association (AIBEA).
Opposing the central government's decision to merge the three public sector banks, CH Venkatachalam, the trade union general secretary, said: “Firstly, there is no evidence that merger of banks would strengthen the banks or make it more efficient.”
He said no miracle happened after the merger of five associate banks with SBI.
"On the other hand, it has resulted in closure of branches, increase in bad loans, a reduction of staff and a reduction in business. For the first time in 200 years, SBI has gone into loss," Venkatachalam said.
According to him, the bad loans of five associate banks of SBI as on March 31, 2017 were about Rs 65,000 crore and that of SBI Rs 112,000 crore - that is a total of Rs 177,000 crore.
After the merger, SBI's bad loans in 2018 increased to Rs 225,000 crore, he said. The banking industry's bad loans as on March 31, 2018 stood at Rs 895,600 crore.
Bank mergers can also lead to some customers switching to other banks.
"I have an account with Vijaya Bank for decades now. I wouldn't want anything to change. Isn't it unfair customers are given no choice at all? One fine day everything changes and you need to comply with it," said Rahul Kinshuk, a resident of Mumbai.
According to the 2017 Retail Banking Satisfaction Study by the global marketing firm JD Power, 46 percent of respondents whose banks went through a merger within the previous 12 months reported they would definitely switch banks.
But among retail banking customers whose banks merged one to three years prior to the survey, only 29 percent said they would move on.
An older study by the Deloitte Centre for Banking Solutions found that of those who did move to another lender, a surprising 36 percent said they did so for emotional reasons.
Earlier, India had asked RBI to prepare a list of candidates for merger among 21 government-controlled lenders as it seeks to strengthen a banking system laden with bad debt. In a meeting in August, finance ministry officials also asked the Reserve Bank of India to suggest a time frame for the consolidation.
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