Banks and the Politics of Merger
The bank mergers announced by the government are the most significant in five decades. The Modi government's ability to push its agenda through Parliament made it possible.
The merger of public sector banks announced by Finance Minister Nirmala Sitharaman is the most significant move made in the banking sector in the five decades since the nationalisation of banks. It almost completely overhauls the current banking structure.
Indira Gandhi nationalised the private banking and financial systems to advance her socialistic goals. The second Modi government, through Nirmala Sitharaman, has now gone a step further.
The announcement follows the merger of 10 public sector banks into four banks in 2017; the number of 27 public sector banks will be reduced to 12.
New Banks: Punjab National Bank (Merger of Oriental Bank, United Bank, PNB), Canara Bank (Merger of Canara Bank, Syndicate Bank). Union Bank of India (Merger of Andhra Bank, Corporation Bank, Union Bank) and Indian Bank (Merger of Allahabad Bank and Indian Bank).
With this, Punjab National Bank will become the second largest public sector bank in the country. Its total banking and business value is estimated at Rs 17.94 lakh crore. State Bank of India will remain the largest public sector bank with a total value of Rs 52.05 lakh crore. The new Punjab National Bank will have one lakh employees; Canara Bank 90000; the Union Bank with 75,000 employees and Indian Bank 43,000 employees.
The bank merger is not a policy decision advanced by the Modi government. The merger of public sector banks was an important proposal in the Narasimha Committee report submitted in 1990. The validation for the merger is that services, costs, and business growth can be made better through the merger. Consolidation of costs is important in this regard. It is worth noting that the number of branches, and staffing can be reduced through the merger.
The All India Bank Employees Association, one of the strongest organisations in the banking sector, had opposed the recommendations of the Narasimha Committee report. Proponents of the merger say that the PSU banks are overstaffed. The labour unions also raise the question of how it is planned to merge this vast network of employees. The red flag they raised on the merger meant no decision could be taken in a hurry,
Since the Center has not had a stable and lasting government since 1991, following the implementation of liberalisation, the main proponents of that policy, Dr. Manmohan Singh and P. Chidambaram could not effect the mergers. With the political majority of the Modi government and its ability to move political decisions in Parliament, the banking merger became doable.
[Autotranslated from Hindi]