New Delhi: The decision to merge 27 public sector banks (PSBs) into 12 would neither lead to stability nor improve their financial health, said bank unions on Friday minutes after Union Finance Minister Nirmala Sitharaman announced the consolidations. Workers from across PSBs said they will protest against the move on Saturday.
"This only weakens the banking system and will also go against the aim of financial inclusion," said Debasish Basu Chaudhury, general secretary of the Bank Employees Federation of India (BEFI).
The protest will be held under the aegis of the Joint Platform of Banking Unions, which includes nine federations and representation from all public sector banks in India.
"We are against this merger. A key reason is that even today, many people continue to exist outside the banking system,” said Chaudhury. “In earlier instances when banks have been merged, we have seen that branches and offices are shut down."
Sitharaman announced a series of mergers involving 10 state-owned banks as the government moves to strengthen a sector struggling under a mountain of debt and ensure stronger balance-sheets to boost lending and revive economic growth. The mergers, which cut to 12 the total number of state-owned banks, from 27 in 2017, are the first since Prime Minister Narendra Modi's government won re-election in May.
The biggest merger is that of the Punjab National Bank, Oriental Bank of Commerce and United Bank. The three together will form India’s second-largest bank -- after the State Bank of India (SBI) -- with Rs 17.95 lakh crore business and 11,437 branches.
Pointing to the ailing health of public sector banks and the annual report of the Reserve Bank of India (RBI) that showed an increased 73.8% in the rate of growth of frauds, Chaudhury said, "Banks are having to write off their loans and ultimately, big businesses are gaining from this. When recession hit the globe in the past, smaller banks were crucial in protecting India. Creating larger banks will undo this."
All India Bank Employees Association Joint Secretary Devidas said the consolidation should not have been an economic priority. “Right now, we need stability," he said.
"It seems to be unmindful. The PNB and the Oriental Bank of Commerce are both northern banks. But the United Bank of India is headquartered in the east. How will this take place? This is a self-defeating merger. The Indian Overseas Bank and the UCO Bank aren't doing well. Yet, they continue to be independent, how will they be strengthened? There needs to be some clarity,” he added.
While maintaining there was no immediate fear of retrenchment since the banks were already facing a crippling staff shortage, Devidas said, "We are in a situation when bank branches are closing down, and yet it is being said this is for strengthening. There seems to be no rationale behind this merger. It is not like the weak banks have been merged with the strong banks.”
“What is the criteria for compatibility?” he asked. “The most important thing is that you need economic stability. Mergers will not lead to revival. It doesn't have any logic behind it."
"We see the banks from within, this will not help," he added.
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