big merger

Source: The Hitavada      Date: 19 Sep 2018 14:57:49

THERE is little doubt that the Government has thought progressively to contemplate merger of three public sector banks (PCBs) -- the Bank of Baroda, Vijaya Bank, and Dena Bank -- with an idea of creating the country’s third largest lender as one of the economic growth engines. There may be certain sections of economic opinion leaders with some doubts about how things would shape once the merger is effected. No matter those doubts, there appears to be a favourable mood in economic circles about the proposed merger that would lead to a new entity with cumulative worth of Rs. 14 lakh crore-plus. If this plan is put in place smartly, and then operated more smartly, it will make significant contribution to movement of credit in the country in the coming years. 

There are reasons to believe that the Government is undertaking such a move with a long-term thought for economic recovery and better management of national financial assets. Thanks to the recent Tsunamic wave of non-performing assets (NPAs) that are believably the outcome of inept bank management, such measures seem to have become necessary. Obviously, the Government is looking at positive possibilities stemming from this major move to spruce up the banking sector as well. From that angle, too, this proposal is welcome.


In fact, some such moves should have been undertaken much earlier so as to give a jolt to the staid banking sector that was falling prey to its own ineptness and its own inability to withstand political pressure to lend money to undeserving parties. When mergers of such a level take place, the whole atmosphere tends to undergo a change for the better. For, such moves shake people out of stupor as a natural competitiveness gets injected into the system. For, when the cumulative banking entity gets larger in one day, all parameters of management of funds and people change and competence becomes the buzz-word. There also is a surge in general enthusiasm among the work-force and the quality of service improves. There is no doubt that these positive developments would mark the new entity’s persona.


Of course, the country has other very large public sector banks that also have been expanded with mergers, like the State Bank of India. There is no doubt that the SBI is one of the iconic institutions of India’s banking sector. Yet, it is not without its own foibles whose cumulative effect on banking is not always positive. Even as the SBI claims, and rightly so, that it is one of the global leaders in banking, it is affected by some systemic flaws that impede its efficiency. Even the SBI is not without its own share of NPAs that raise a question-mark on its efficiency.


Let us only hope that such foibles do not affect the new entity after the merger of the Bank of Baroda, Vijaya Bank, and Dena Bank. Let us hope that Government allows the managers of the new entity to operate fully on professional terms with no political interference. Let us hope that issues of pseudo-compassion do not afflict the new entity while lending money to parties. For, these were the ills that affected the performance of many public sector banks in the past. If the new entity is not protected from these ills, then the merger will be an exercise in futility.


In fact, the entire Indian banking sector needs a heavy dose of professionalism beyond any political interference and pseudo-social considerations. Now that the country is waking up to the dangerous fall-out of wrong banking culture, it is time it did away with all wrong values and got going with right method and manner of operations. The proposed merger should be treated as a starting point of the new effort. If this requires a massive effort on managerial side, a much larger dose of right political will also is the need of the hour. Mere technical merger will serve little purpose. What is needed is complete professionalism.