It has taken inordinately long to harness the gains of  merger of public sector banks. The banks were amalgamated fourteen months ago on 01.04.2020, but the congruence of operations is still elusive. There are serious integration issues on software alignment. The product profiles are disparate and emotional integration of staff is still a far cry. The staff of merged banks are still operating in silos and identified on the basis of their erstwhile banking parentage. The  struggle for acclimatisation has taken a priority over the  concerns for business development. The credit off-take is decelerating and quality of assets is deteriorating by the hour clock. 

The customer is no longer the king and main beneficiaries are glow sign makers, printers, stationery suppliers and hardware & software vendors. The depositors are running from pillar to post for new cheque books, pass books, ATM cards and branch codes which in many cases has been changed three times. The borrowers are the worst sufferers. They have lost identity and are struggling to re-establish their credentials with a new set of loan appraisers and monitors. Some of the banks are insisting on drastic modifications in terms of sanction and the way a drawing power is given in cash credit accounts. The cash flows are being impaired for borrowers based on calculations totally distant from how it was derived out in the merged bank. There is insistence on premature closure of loans availed from merging banks as there are no matching products in merged banks. The interest rates are also going up due to stringent risk rating methods of merging banks.

There is dis-satisfaction writ large on both the bankers and the customers and hardly a day passes when there are no shouting bouts across bank counters. The promotion policies are also being compromised due to sudden flatulence in HRD numbers and officers have been promoted to the levels of Assistant General Manager without any test or interview, compromising on the discerning quality and ability of the custodians of public money. A part of this dilemma was anticipated and factored as amalgamation pangs but further procrastination is likely to impede the nation's march towards a USD five trillion economy adversely. Banks, which are the wheels of economic growth of a country, have to be carted in the right direction to avoid slipping into plain & mundane dispensers of cash far away from efficiency.

From 28 banks in the public sector, the number has come down to 12. The envisaged purpose of merger was to leverage the larger scale of operations  of merged banks into raising bulk funds from call-money or international markets at cheaper rates. This would have reduced the finance cost of borrowers and enhanced the returns on deposits for the pensioners who thrive on bank interest. But this aim has been sadly defeated by the onslaught of COVID-19, which is not leaving the gasping Indian economy from its vice grip and evil embrace. There are few new projects. Industries, expansions and banks are subsisting by parking the surplus funds with RBI at abysmal 3.5% interest income and cross-penalising aging depositors by moderating returns on their investments. 

The other important purpose of merger of state owned banks was to avoid an unhealthy competition among themselves to gullible customers who used to shop around with sanction letters for competitive pricing and security. This has also been roundly defeated because still the remaining twelve banks are “All things to all people”. They continue to do the same job with similar products at the same speed and efficiency. The customer has lost choices  as far as the number of banks is concerned but has gained no benefit in terms of any specialised or quality product or service due to merger. 

However the paradise is still not lost and from the evolving muddy poodles the sphinx of Indian banking can rise to greater heights due to its resilience and the persistent support of its seemingly large customer base. SBI alone has 45 crore customers which is more than the population of entire Europe. Having initiated the fundamental reforms, the Reserve Bank of India / Government of India should take the initiative into the right direction and conclude the process to delight the customer through following seven steps:-

1. National Consumer Bank

 With improvement in per capita income, the lure for consumer durables is increasing by the day. As such any two of the twelve state owned banks should be converted into full scale National Consumer Banks dealing exclusively in personal loans like Housing Loan, Car Loan, Consumer Durable Loans and Loans against Salary, LIC Policy and Government Security. These banks shall cultivate appraisal and monitoring skills over the years and curtail NPAs as the retail segment in India is also gravitating towards delinquencies. 

2. National MSME Bank

Another set of two banks can exclusively finance MSME and enlarge the employment base through time bound and need based loan disbursal to MSME units, which are the heart and soul of the emerging Indian economy.

3. National Wholesale Bank

Let the State Bank of India and Punjab National Bank be made National Wholesale Banks by swapping their retail business with remaining banks with their Corporate Accounts in a seamless makeover to grow by leaps and bounds.

4. National Infrastructure Bank

The country is yearning for a well spread, durable and assesible  infrastructure to exploit its vast length and breadth to actualise its resources and potential. Let two of these banks be made sole Infrastructure Banks who can raise long term funds and finance projects maturing beyond ten years as the present banks are restricted to issue FDRs for more than ten years.

5. National Gold Bank

With over Rs. 57 lac crores of loans in the entire banking system, the total Gold Loans are just Rs. 1.00 lac crore in both organised and unorganised sectors in India. The country is the biggest importer and consumer of gold which lies lazily in bank vaults adding zero value to the nation's GDP. It, however, continues to add pressure on import bills and value of Indian rupee adversely. Let one bank with national footprints be carved out as a Gold Bank of India doing import of gold, export of jewellery and  imparting gold loans, financing jewellers & diamond merchants. The main purpose would be to cycle gold holdings of Indians into a productive asset for the economy through catchy and innovative products & education that will remove the marks of taboo in society while borrowing against family jewels.

6. National Farmers Bank

In order to support the conceptual efforts of NABARD, let there be two National Agricultural Banks doing retail agricultural lending and focussed recovery. This will actualise the dream of doubling the income of farmers at periodic intervals and uplift the rural markets by ushering belongingness and empowerment.

7. National NRI Bank

One of the tech savvy banks owned by the government can be converted into NRI Bank to service the ever increasing two and half crore Indians working abroad. They shall reap the benefits of reversal of Brain Drain and invite FDI/FCNR(B)/FCCB and ECBs and create a fresh flow of liquidity through focussed attention to NRIs. The branches of this bank can be opened worldwide. 

With specialised job profiles, the country would cultivate a large pool of skilled professionals of various domains strengthening and harmonising banking operations. Such an exercise may take another twelve months to materialise. It would facilitate our march towards a USD five trillion economy. It will empower the customer and make Indians running smiling to the bank.

(Mr. Hargovind Sachdev has over 39 years of banking experience having occupied senior positions in UCO Bank, United Bank of India, State Bank of Patiala, State Bank of Travancore & State Bank of India where he headed the Central European Credit Desk at Frankfurt, Germany from 2006 to 2011 covering 15 countries of Central Europe.)