Merger of PSU banks – Is it really necessary?
Govt of India is wanting to merge government owned banks to make a couple of good banks that can compete in a worldwide race.
PSU banks were hit scarcely by Non-performing Assets (NPA). This is the reason Indian government is thinking of remodeling PSU banks.
Merger will be between equal players.
Union of banks will bring about framing a couple of solid banks. These recently shaped banks can rival solid remote banks and can rise as a worldwide banks.
With expanding NPAs, little banks can’t give more credits, however with merger huge banks can better manage NPAs and might not need to quit giving more advances.
Presently, there are more than required no. of banks in numerous regions. For instance, there are Andhra bank, State bank of India, Bank of India, Syndicate bank in a residential area. After merger just a single branch can supplant all these branches. This will bring about reduction of operational expenses and enhanced effectiveness.
A few organizations and people are taking advances from various banks and are not reimbursing. With the merger of PSU banks, this issue will be explained.
In spite of the fact that merger accompanies additional costs and issues related with converging, over the long haul merger of banks will yield positive outcomes.
Investors will probably give capital to solid banks as opposed to weak ones. This is the issue as of now looked by medium to weak banks. Strong banks like SBI can pull investors.
Not at all like SBI merger, PSU banks merger will make more issues in light of consolidating heterogeneous banks. These banks have diverse approaches and controls.Merging different types of banks will lead to confusion and can further aggravate the present problems.
Merger of banks is costly.
On the off chance that huge banks fall flat, that will be a major hit to nation’s economy. Henceforth it is hazardous to big banks.
Merger may bring about years of administrative issues.
NPAs are heaped up not on account of little banks, but rather in view of wasteful approaches to do with NPAs. Thus, merger won’t take care of the issue of NPAs.
There will be issues of synchronization. For instance, after SBI merger, SBI didn’t stretch out the advantages to all employees in SBI branches to its partner banks like SBH. This brought about dissatisfaction in employees
Weak banks will be forgotten in this procedure, and may close down as they can’t compete with huge banks.
Regionality will be missed. All banks will attain the status of national banks in India.
Even after the merger, there is no guarantee that the newly formed banks can compete worldwide.
Several bank unions are protesting that government is going for merger just to privatize the newly formed banks. If that is true, instead of renovating and privatizing, if the present banks are directly privatized, a lot of expenditure of renovation will be saved. The responsibility to reform banks can be transferred to private players.
NPA issue may not be solved by the converging of PSU banks, yet this will bring about cost effectiveness and can decrease weight of operational expenses for banks. To fight with the world, India require more worldwide level banks. However, how the govt manages the issues related with consolidating will choose the achievement of merging.