Research works discuss pros and cons of merger of banks

Research works discuss pros and cons of merger of banks

A video clipping went viral on social media soon after the merger of Syndicate Bank with Canara Bank and Mangaluru-headquartered Corporation Bank’s merger with Union Bank of India was made public by Centre a week ago.

In the video clipping from an episode of Kannada serial (Maja Talkies) telecast over two years ago, Tulu film industry’s leading comedians Naveen D Padil and Devadas Kapikad were seen predicting, in jest, the marriage of banks, including Karnataka Bank Limited with Vijaya Bank and Canara Bank with Syndicate bank.

According to elderly bankers, the merger of banks is not a phenomenon of recent times. A few months ago, Vijaya Bank was merged with Bank of Baroda. In 2017, State Bank of Mysore was merged with State Bank of India. The talks on the merger of Canara Bank with Syndicate Bank were doing rounds as early as in the late 1960s, according to well-known economist late N K Thingalaya. 

In his doctoral thesis, the ‘Banking Saga’, Thingalaya has mentioned that barring one bank (declared bankrupt), the remaining 19 banks, started in the district between 1906 to 1945, was merged with five banks, including Canara Bank and Syndicate Bank. The collective deposits and advances of the five banks were Rs 607.76 crore and Rs 393.79 crore respectively in 1971. 

“If all the five banks were merged into a single entity, it would have emerged as the third biggest bank in India. But a competitive mindset among banks had stalled the pre-merger process,” Thingalaya, also former CMD of Syndicate Bank, has revealed in the book. Many doctoral research works on banking sector in Dakshina Kannada district had backed the mergers as being an important strategy of growth and survival.

One research work concludes that the merger of more public sector banks, called mega-mergers, is to ‘reap the economies of large-scale operations’. Global corporations expect their bankers to have the expertise, products to serve them anywhere.

Thus, an environment must be created to enable the development of institutions with the size and resources to compete globally, a research work observed.

An analytical study of the merger between banks, by researcher Ashfaq Ali, has revealed that all parameters, including liquidity and profitability, improved after the merger. “Bank mergers are against the spirit of this country’s diversity,” a Bengaluru-based Banker, who has served in Canara Bank, said. With the merger, rural borrowers lose their identity, he said while disagreeing with the findings of research works on mergers.

He recollected that when Lakshmi Bank was merged with Canara Bank, it took 12 years for the staffers of Lakshmi Bank to get acquainted with the Canara Bank’s work culture. The major challenge is the redeployment of surplus human resources and customisation of software. “If the software is not compatible, the merger of banks will prove to be an expensive exercise,” he added.

There will be no more job opportunities in the banking sector, rued Syndicate Bank Retirees’ Union general secretary K Vasanth Rao. The ongoing campaign demanding parity in pay and upgradation of pension, pending since 1986, will soon lose steam, he felt.   

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