Page 29 - Banking Finance January 2022

ARTICLE

can take months. Through this period, customers of the
banks that are being merged into other banks could avail
several services such as cash deposits and withdrawals
and inter-bank fund transfers etc, either through their
existing bank's branches or through the new anchor
bank's branch soon.

Y Furthermore, the existing bank account numbers, Indian
Financial System Code (IFSC), Magnetic Ink Character
Recognition (MICR) Code etc. will also remain the same,
and customers of the banks will also be able to use the
same existing cheque books and debit cards for now.
Eventually, though new cheque books and pass books
as well as debit cards will be issued with the details of
the new bank.
Y Internet banking portals and mobile applications of
individual banks are also likely to operate just like earlier Y Provides better efficiency ratio for the business
for now. So, the customers and deposit holders of the operations which is beneficial for the economy
banks won't have to worry much or go through any sort Y With the large scale expertise available in every sphere
of fresh applications process in the near term. of banking operation, the scale of inefficiency which is
more in case of small banks, will be minimized
Benefits of amalgamation for customers
Y After merger, Indian Banks can manage their liquidity -
Y Customers will be associated with a much larger bank, short term as well as long term position comfortably.
having a widespread pan-India network. Thus, they will not be compelled to resort to overnight
Y Customers will now have access to a larger number of borrowings in call money market and from RBI under
branches. Liquidity Adjustment Facility (LAF) and Marginal
Standing Facility (MSF).
Y Customers can enjoy ATM services across increased
network of ATMs without any additional charge Y Since number of public sector banks has come down.
This will end the unhealthy and intense competition
Y Customers will have access to a wider array of products
going on even among public sector banks as of now.
and services.
Unhealthy competition leads too many unethical
Benefits of amalgamation for the practices and regulatory violations as noticed at
present.
Organization
Y In the global market, the Indian banks will gain greater
Y Merger helps to reduce the cost of banking operation. recognition and higher rating.
Y Will give them a wider geographical reach and make Y The volume of inter-bank transactions will come down,
balance sheets stronger. resulting in saving of considerable time in clearing and
Y Multiple posts gets abolished, resulting in great financial reconciliation of accounts.
savings Y The burden on the central government to recapitalize

Y Merger will result in better NPA and Risk management the public sector banks again and again will come down
substantially.
Y It helps the geographically concentrated regionally
present banks to expand their coverage Y For meeting more stringent norms under BASEL III,
especially capital adequacy ratio, the larger banks need
Y The objectives of financial inclusion and broadening the
not struggle.
geographical reach of banking can be achieved better
with the merger of large public sector banks and Y Synergy of operations and scale of economy in the new
leveraging on their expertise. entity will result in savings and higher profits.

BANKING FINANCE | JANUARY | 2022 | 29