New Delhi, November 3, 2018: “The Union government is pushing through the merger of Public Sector Banks (PSBs) with a misplaced notion that fewer stronger banks will be “too big to fail”. It’s ironical that the news or bank merger was announced on the 10th anniversary of the fall of Lehman Brothers, the fourth largest Bank of the United States, which makes us seriously question the lessons that the government has learnt from the global financial crisis. In the aftermath of the crisis of September 2008, prominent economists have prescribed to move towards smaller banks.
“There is no evidence to back up that bigger banks will become stronger and more efficient banks. Even supporters of the merger agree that it would not result in improving asset quality as there is no fresh infusion of capital. Hence, mergers will not be a solution to the ongoing problem of NPAs faced by the public sector banks.
“Several case studies have shown that merger announcements trigger confusion, anxiety and insecurity in staff, leading to slowdowns in business. The organisational disruption through the merger procedures relegates every other activity to the backstage. Banks involved in the merger have to do fire-fighting for the next few years, adversely affecting other banking activities in order to integrate people, processes and procedures.”
These were some of the key messages coming out of a public meeting, where members of the civil society, bank unions, and opposition parties addressed in New Delhi last week to protest the proposed merger of Bank of Baroda, Dena Bank and Vijaya Bank, which was done with hopes to reduce the needed capital infusion into these banks and clean up their balance sheets.
Debunking the government’s claim on the survival of the large banks, Prof CP Chandrasekhar, a professor at the Centre for Economic Studies and Planning at the Jawaharlal Nehru University said, “The 2008 financial crisis has demonstrated that the size of the bank is no indication of their stability.”
“The government may complete the merger but won’t be able to take the problems of the banking sector off its hands. The merger is going to be a failure, and the cost of this failure will be borne by the workers of these banks and the common people,” prophesied the renowned economist at the meeting titled Bank Mergers – A Step Towards Reversing Nationalisation. He emphasised that the revival of the idea of consolidating banks only shows the government’s inability to resolve the NPA crisis.
Speaking at the meeting, Comrade Thomas Franco, General Secretary of the SBI Pensioners Association, exhorted all the unions and civil society members to come together to oppose this bill tooth and nail like it was done for the FRDI bill. Citing examples of the merger of SBI and its associates’ banks, he told the audience that it led to the reduction in the staff hiring and closing down of branches, thus affecting the bank employees and the general public alike. “It is essential to reach out to the public and the opposition parties so that the issue is raised both inside and outside the parliament”, he stressed.
Com Narendra Nath, President of All India Bank of Baroda Officers Federation, asked all the unions and opposition parties to resist this move and warned that the recent bank merger is a test case before merging more banks.
Blaming the Board of Dena Bank behind the current NPA crisis in the bank, SS Prasad, General Secretary of the All India Dena Bank Officers Federation said, the analysis of the 16,600 crore NPA of the Dena Bank shows that 78 per cent of this money was approved by the Board.
Tapas Kumar Ghosh, a Deputy General Secretary of the All India Vijaya Bank Officers Association, expressed concern on the negative Return of Asset of the combined entity of the Dena Bank, Vijaya Bank, and Bank of Baroda. He asked, will it also be put under the Prompt Corrective Action, which freezes the lending activities?
The public meeting, jointly organised by All India Bank Officer’s Confederation (AIBOC), and Centre for Financial Accountability (CFA), was also addressed by Kavita Krishnan of CPI-ML (Liberation); Atul Kumar Anjan of the Communist Party of India; and Dilip K Pandey, a national spokesperson of the Aam Aadmi Party, who in unison accused the government of misleading people on the issue and extended support to various bank unions in their fight to save the public sector banks.