Race against time! PSU banks form high-level committees to meet merger deadline

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Published: September 9, 2019 6:44:49 PM

Bank Merger: Top management of these banks have also identified the core business areas that will be looked after by the specific teams.

PSU Bank Merger, Bank Merger and Consolidation, Mega Merger DeadlineBank management is trying to meet the stiff deadline of March next year.

PNB-OBC-UBI merger: Top management of all ten public sector banks have stepped up their efforts to complete the merger process by March next year, as announced by the finance minister Nirmala Sitharaman last month. Senior executives of these banks have held high level meetings last week to sort out the modalities of the merger and amalgamation process. “All of them have also formed separate committees for tackling the issues related to HR, integration of information technology network, books of accounts and other things. The specialised banking area which will be looked after the merger by the teams of different banks have also been identified,” said a senior official of Indian Banking Organisation.

“Integration of Information Technology Network is the tricky part and it will take at least one year,” the senior official told Financial Express Online, requesting not to be named.

Finance Ministry has given these banks time till March next year to complete the merger and amalgamation process. It has put these banks in a bind as it will be a race against time due to logistical and complex technical issues as integration of technology network may stretch till next September against the deadline of March.

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For example, headquarters of three merging banks, Union Bank of India and its two amalgamating banks – Corporation Bank, Andhra Bank are located in Mumbai, Bengaluru and Hyderabad respectively, making the integration process difficult to execute.

In addition to dealing with the challenge of relocating the core activity of their headquarters, these banks also need to integrate different processes. The high level committees formed by these banks will decide how to integrate different processes related to lending operations, human resources, technology integration and which specific sector of the banking activity will be looked after by the team of which bank following the merger.

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In order to increase the efficiency of operations and reduce the cost, Prime Minister Modi embarked on merger and consolidation of public sector banks in 2017. In the first round, SBI merged its five associate banks and Mahila Bank with itself. In the second round, the merger of Dena Bank and Vijaya Bank with Bank of Baroda was announced. In the third round announced on August 30, 6 public sector banks will merge in 4 larger PSU banks to achieve the economy of scale.

Under the latest round of mergers, OBC and United Bank of India will merge with PNB while Syndicate bank will merge with Canara Bank. And Andhra Bank and Corporation Bank will merge with the Union Bank of India while Allahabad Bank will merge with Indian Bank.

“The aim is to complete the full book merger by April next year,” said the official.

However, the problem with integration of books of account is that it can only be completed following the approval of balance sheets of respective banks for FY 2019-20.

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“Approval of balance sheets is generally completed by mid-May. These banks may have to continue to work on different balance sheets till the approval of their balance sheets,” clarified the official.

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