Page 31 - Banking Finance January 2022
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ARTICLE
to the bigger bank also. Acquiring Banks have to handle reconciliation of accounts, updating of records etc.
the burden of weaker bank. Especially in Suit Filed Accounts, SARFAESI/DRT Cases,
Y Many controlling offices have to be closed. This may Written off Accounts, this problem may be acutely felt.
In the meantime, cases of fraud and misappropriation/
result in data losses on one side and dilution of control
embezzlement may also be reported.
on the other.
Y When a big bank books huge loss or crumbles, there may
Y It is difficult to manage the people and culture of
be a big jolt in the entire banking industry. Its
different banks.
repercussions will be felt everywhere.
Y Larger Banks are more vulnerable to Global Economic
Y After merger, the share price of the merged entity
Crisis.
might fall immediately. The rate of dividend also might
Y Coping with the Employee disappointment could be diminish during the first two or three years following
another challenge. mergers.
Y For the top positions of the banks, whose number may Y For general Public, There may be some confusion
get reduced in the post-merger scenario, there may be initially. It may be difficult to remember the name of
tough and ugly competition. the banks which have been grouped together and
Y Since many of the GOI's nominee and RBI's amalgamated.
representative on the bank boards will lose their jobs. Y While the merger may have been effective from April
This may loosen the control of RBI over larger banks. 1, the integration of all the processes and technology
There is also a likelihood of a large scale irregularity may take several months.
escaping the immediate notice of RBI, but surfacing
Y There may surely be overlapping roles, which may be
much later. This may spoil the reputation and credibility reassigned; some of the employees may also be
of individual banks and the regulator (RBI).
transferred to different departments or branches as the
Y Since the number of bank branches will be large, transition process takes shape. There may be some
managing them may pose greater challenges. impact on new hiring too.
Y Mergers may result in clash of different organizational Y Risk of failure increases if the executives are not
cultures. Conflicts may arise in the area of systems and committed enough in bringing the merger platforms
processes too. together for the merging and taking over bank. Such
failure may prove brutal for the Economy.
Y People working in the larger bank (acquiring bank) may
try to dominate the personnel working in the smaller Y Impact of customers on banking merger or acquisition
bank (acquired bank). Thus, the latter may be treated is often quite emotional. If customer perception is not
as second class citizens in the new, merged entity. managed with frequent and careful communication it
may lead to loss of business which is never good for the
Y Staff identified as surplus in many pockets (urban and
metros) may be transferred to far off places. This might Economy.
create turmoil and widespread protests. Y Many banks focus on regional banking requirements.
With the merger the very purpose of establishing the
Y Promotional avenues for staff after merger may come
down. In promotions, the staff of the acquiring bank bank to cater to regional needs is lost.
might have a lion's share, leading to strong Disadvantages of amalgamation of
discontentment, rivalry and open disputes.
public sector banks on their employees
Y Many Trade Union leaders may lose their prominence
Y The merger of public sector banks will create an excess
and even positions, in the new set up. workforce, which may consecutively lead to early VRS
Y Initially, the customers of both the banks may find it (maybe forcefully).
difficult to deal with new set of people, their attitude Y It may also stop further hiring or recruiting people
and style of functioning. curtailing employment opportunities. And chances of
Y Several problems may crop up in the area of Career Progression in form of Promotions may hamper.
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