Page 48 - Banking Finance June 2019

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highest market share (7.5% for advances and 7.8% for
deposits).
The proposed merger's CASA ratio will remain high at
34.06%.
The amalgamated bank's net NPA will be around 5.71%.
(SBI is at 5.29 %.)

2008 crisis European Union has seen a downward trend
in the consolidation of banking sector as they are still
reeling under TBTF (Too Big To Fail) banks after effects.

Voluntary consolidation is a good idea but forced
consolidations have various pitfalls. The proposals should
be discussed with the stakeholders beforehand, and the
pros and cons properly weighed.
Fewer banks mean more concentration and lesser
competition. It implies that there could be more focus
The merged entity is expected to be a strong bank having a
on big clients as smaller transactions will not make much
larger customer base, well capitalized and operating on an
sense from an economic viewpoint, thereby financial
advanced technological platform. However there are
Inclusion would be adversely impacted.
concerns regarding asset quality of Dena Bank which need
to be resolved. Consolidation of SBI should not be seen as a role model
because the merged banks were already subsidiaries
IMPEDIMENTS in path of Consolidation having a common IT platform and similar treasury
operations.
of PSB's:
One plus one does not always make two. Of course in
In the current scenario we have majority of PSB's running
mathematics it does, but in consolidation of banks which
in losses. Consolidation of two or more loss making entities
are systematically weak, it does not.
is not expected to be a viable solution. Further, there are
many other hurdles which are given below:
Critical Analysis
Consolidation does not mean necessarily a change in the
working culture. There is a need to revamp the existing The present is tense for the banking system. We need to
system and ensure accountability, compliance, devise strategies to make the future perfect for banking
transparency and fairness. system. There is a strong need to have robust banks which
are well capitalized and have sufficient liquidity. Technology
Serious issues in integration of technology platforms
is another key factor in transformation of banks. Banks are
need to be addressed on priority. Banks are using
not merely sellers of products, but solution providers to
various versions and softwares like B@NCS24, FINACLE
customers. Technology driven banking is a win win situation
etc.
for banks, customers and third party vendors.
Multiplicity of branches and ATM's of consolidated entity
implies closure of branches/ATM and reduction of staff
Moreover, with more millennial and generation Z joining as
members. This could easily boil to a serious HR
bank customers it is becoming mandatory for PSB's to be
confrontation.
the best in technology if they want to be the numero uno
Consolidation is a worldwide phenomenon however post choice of customers. Further, advanced banking technology

48 | 2019 | JUNE | BANKING FINANCE