JOSE K JOSEPH, OP
Bhubaneswar: Without addressing the issue of mounting bad loans of public sector banks (PSBs), the Centre’s plan to merge PSBs will ultimately help the private banking sector, feel analysts and union activists.
CARE Ratings’ NPA analysis for the first quarter of 38 banks found that PSBs are more stressed than private banks and the State Bank of India (SBI) accounted for about 22.7 % (Rs 1,88,068 crore as on June 2017) of the total NPAs during this financial year.
The analysis also revealed that the top five banks together – SBI, Punjab National Bank, Bank of India, IDBI, Bank of Baroda – account for 47.4% of NPAs totaling to `3,93,154 crore. Interestingly, ICICI Bank and Axis Bank are the only private sector banks among the top 15 banks with a combined share of 7.9% in the total NPAs.
However, without considering any of these aspects, the Union Cabinet gave an in-principle approval for the consolidation of the state-owned banks. The Centre justifies its decisions by claiming that it was done to suit the needs of the growing economy. Meanwhile, many economists regarded the decision as fruitless and a wasteful move.
“The merger decision will result in losses for PSBs. There will be a reduction in the number of employees and the existing employees will face problems to adjust with the new bank. So the government has to address the issue of increasing non-performing assets (NPA) for saving the PSBs,” said economist Santosh Kumar Mohapatra. Similarly, others believed that this decision would create a lot of confusion among the customers, forcing them to move towards private sector banks.
“The merger of PSBs was first suggested by Narasimham Committee in 1998. The committee at that time suggested the merger of strong public sector banks and selective closure of weak ones. But, now the scenario has totally changed with many private players in the banking sector. So, a sudden decision will confuse the existing PSB customers and they will be worried about what would happen to their accounts, cheque books and ATM cards. This confusion or panic will compel them to trust the private banks more than PSBs,” said economist SN Misra.
In fact, several banking employees’ associations raised concerns about the decision of the Centre. “If all existing PSBs are merged, many branches will be shut down. For instance, within one kilometer of Master Canteen in Bhubaneswar there are around five branches of different PSBs. So, the new PSB will shut at least three branches and many employees would get affected,” said Jagadish Jena, president, All Orissa Bank Employees Association.
Bank employees are also expecting the termination of many accounts after the implementation of this decision. “We cannot say what would happen to our cheque books and other bank guarantees. So, it will have an impact on our existing customers and they will come to banks to clear their worries. Therefore, we are expecting a demonetisation like situation after the implementation of the merger decision,” said JB Mohapatra, convener, United Forum of Bank Unions.
