MEGA BANK MERGER 2020

Hello Friends, 

My this blog is related to tell you about the Mega Bank Merger of 2020.

The Union Cabinet has approved the the largest ever merger of 10 Public Sector Banks (PSBs) into four entities on Wednesday, 1st April 2020. This Bank merger aims to have fewer but stronger money lenders in India and in a bid to make them globally competitive. 

According to the Finance Minister Nirmala Sitharaman, the consolidation of the banks has been done so that the customers can reap the benefits of larger banks and more funds can be made available to them for credit purposes. 

"In a merger, there is an anchor bank and an amalgamating bank or banks, where the latter gets merged with the former."

Advantages Of Bank Mergers 

• It will enhanced capacity to increase the amount of credit. 

• It will lead to a strong national presence and global reach.

• It gains in operational efficiency that will reduce the cost of lending. 

• Larger Bank is capable of facing global competition.

• The merger will reduce the cost of banking operation.

• Merger will result in better NPA and Risk management

• Merger will help in improving the professional standards.  

• For the bank, retaining and enhancing its identity as a larger bank becomes easier. 

• Chances of survival of under performing banks increases hence customer trust remains intact which is vital for the Economy. 

• Larger size of the Bank will help the merged banks to offer more products and services and help in integrated growth of the Banking sector.

• Decisions on High Lending requirements can be taken promptly.

• A larger bank can manage its short and long term liquidity better. 

• Bank staff will be under single umbrella in regard to their service conditions and wages instead of facing disparities.

   So, the context of the merger is in the best interests of the customers, the banks, and the economy of the country. Thus, customers do not need to panic as their money will be safe. Official announcements and procedures will be communicated by the banks through emails or letters for the transition of savings/current accounts, locker facilities, fixed deposits, loan accounts etc. with the new bank.

    Points to be taken care by a Account Holders:                 

• Get ready to change your cheque books as the various banks get merged. 

• The customers should make themselves aware of their updated account details. If they have accounts in more than one bank then the two accounts may be allotted a single customer id and their IFSC codes can also change. 

• Make sure that your mobile number is updated with the bank so that you receive all the official details of allotment of new accounts instantly.

• Credit/debit cards issued by the merging banks may have to be exchanged for those of the merged entity although the former are likely to remain valid for the interim period to ensure no disruption in services.

• Paperwork and keeping financial trail of fixed deposits made will increase a bit as these will be transferred into the merged bank.

• It is, however, not clear what will happen to the interest rates of those who have loans running with these banks as the MCLR  (Marginal Cost of funds based Lending Rate) rates are different for different banks.

• Shareholders of the the publicly listed banks will be impacted. 

• The branch network would become larger so access to bank branches would become easier provided the merged entity does not shut down all branches of merging banks.

• While transitioning, the individual online banking portals of the merging banks may not exist or you may be redirected to the merged entity’s portal. So stay alert while redirecting to the new website and confirm that you are logging in to the correct bank website for internet banking and not on a phishing web page.

• After the merger of the banks become effective, one should be aware of the free and chargeable services of the new bank as well as the interest rates for deposit and borrowing, etc

Merits Of Bank Merger

• Customers will get to choose from a wide array of products such as mutual funds, insurance, traditional loans, and deposits.

• Recapitalization need from the government will reduce.

• Service delivery may improve.

• Technological up-gradation is possible.

• A large capital base would help the acquirer banks to offer a large loan amount.

• Larger Bank is capable of facing global competition.

• The merger will reduce the cost of banking operation.

Demerits Of Bank Merger

• The local identity of small banks won’t be notable.

• It will be tough to manage issues related to human resources.

• Few of the larger inter-linked banks can expose the economy to financial risks. 

Thanks and Regards

Kulvinder Kaur

B.Com(H), MBA(Finance)

9871580806, 8826566751

rightsteptoinvest@gmail.com