Do you think merger of PSU banks are essential for growth?

Big states are being 'broken' for better management in India ( Telengana, Chattrigarh, Uttarakhand etc. ). Regional political parties are becoming more and more popular in their respective regions ( Trinomul Congress ? ), FM Radios are opening their 'regional' brands in the states every month. In India, some like to speak English, wanted or not, some wont speak the Official language even knowning the language ( most places in the South ?). Some eat  pure vegeterian, people in some states may not live a single day without fish in their dishes ( Bengal ?).

In some states, Chit Fund is more popular than a main-stream Bank - some people treat such Fund as a "cheat" . When VRS in PSU Bank was offered, in some states, staff hurriedly left their Banks to work in Gulf countries. In Eastern part of the country the response was limited. Rural customers in most Banks do not read anything sent by their Banks Head Office written in English, they prefer to what is said " by mouth" in varnacular language.s.

And .. this is India. Elsewhere, in the USA and Europe, even now, average 8(eight) BIG Banks are being wound-up for reason of failure per month. You said, big Banks after merger will be good .. guarantee ? May these not create Regional imbalances in CD ratio ? You want that all finances, credits  only to be parked in a particular region of India after merger of Banks assumeing that head offices of such big enteties will be located in big cities ?

Finally, BIG may not always be good. Debate and decide. There is every reason to believe that big Busness Houses are interested for merger of Banks for their vested interests, not the people in general.

the mergers will turn the clock back, banks never felt social responsibility, they were made to feel through government regulations, take any new scheme by the government there is no voluntary participation, but forced to participate under pressure including financial inclusion.  Merger will result in making the banks go back in customer service because they will give less opportunities for the public.

Its really necessary to change the mindset of PSU employees 2 work hard 2 achieve a high level of customer service .... dont hide there inability through mergers. let them work for excellence.

Recent events have proved that size does not guarantee safety and much less efficiency. PSU banks are not certainly tiny and are of reasonable sizes mostly. Two critical factors supporting non merger are: ensuring competition and customer service. In country as diverse as ours, one size fit all kind of homogenity of a few large banks will hinder rather than promote customer service. Secondly, in todays context what is critical is technology and  nimbleness not just size. If a particular bank grows well, capital should not be a problem.

Banking industry can be primarily classified into PSU and Private banks. The general opinion is that public banks are not customer oriented, are inefficient but still indispensable for economic growth of the country. Why the latter part of the statement is true is evident from the fact that during the slowdown, the lending to all sectors (including risky ones like housing, realty) was done by PSU players.

I am sure many of us must have observed the improved customer orientation, marketing and attractive products being launched by PSU banks, sometime much better than their private counterparts.

Mergers of small and non-profitable PSU banks with big brothers might be the obvious alternative in the mind of government, but the role these banks play in small cities is an important bearing in this decision. In fact, with improvement in systems of PSU banks, they have become a threat to the private banks which were mainly attracting customers on the claim of being more productive though expensive. A borrower/corporate might not mind visiting the branch 10 times if he gets a term loan of Rs. 100 crore at 2% lesser cost.

The recommended strategy could be to test a merger or two and see the results in terms of profitability of the combined entity and how much business has been generated. Ultimately the fittest will survive and others will perish.

I for one am not sure how  consolidation of various disseminations would aid value generation wherein the only common quotient among all of them is being "PUBLIC SECTOR BANKS" .This would only help in creating an inefficient,omnipresent behemoth having critical mass but an institution sans its nimbleness,creativity and enterpreneurship.The wave of technology ushered in by the new generation banks and the paradigm changes in the industry benchmarks vis a vis the customer experience and CRM,s.Post the global meltdown the predatory fears of aggressive takeovers have recededif there were any allowing opportunity for our home grown banks to build resilience by way of cleaning up of books.If consolidation  was the only answer to infinite growth then some of these legendary institutions would not have folded up as they did instead their mammoth size infected scores of smaller cleaner institution who took the size as their face value to their peril.It is only transparent policies,accounting practices and being answerable to the stakeholders and eschewing a policy of uninhibited growth would eliminate the need for consolidation.

Merger of PSU banks can be very easy hypothetically and that is the reason govt is not forcing to say yes to everyone. As a customer of any X bank we always prefer to do banking business according to the different tastes like services, fast liquidity, easy disbursal, customer centric, guarding against security of capital and future possibilities of competitiveness.

The role of RBI would be limited and no competition among banks and customers to some extent. Why should a profitable bank must merge with a loss making bank. Ideally all banks must stay and improve their productivity, reliability, customer focused, dependable. 

I am not pretty sure how a consolidated big CITI like bank can help the economy growth of India. The next stream of growth has to come from rural india and unlike urban india we dont have a web of private and psu banks in rural india. What i feel it is the compettiton between the PSU banks which will benefit the rural demand for banking operations.

No doubt from the market's prospective, consolidation will lead to the value creation and stakeholder will get better valuation of their holdings. At the same time, small PSU bank can survive themselves from the aggresive foreign banks tactics. However, my doubt over the growth still remains same as we might lose the competition as well the priority(rural growth).

There are 20 PSU banks and these are region based. E.g Syndicate Bank, Canara Bank, Vijaya Bank  and Corporation Bank are based in Karnataka. Similarly, Indian Bank, Indian Overseas Bank are based in Tamil Nadu.

I support the merger and consolidation of PSU banks within the Region but not other wise.  As in my previous note, I support merger based on RORA, the ability to generate additional revenue and provide stiff competion to Private banks and should be based on case by case basis.

It seems people forgot the experience of merger of New Bank of India with Punjab National Bank and its repercussions.  People also remember the take over of Global Trust Bank by Oriental Bank of Commerce and the circumstances under which it was taken over.  The failure of large banks of the world. The guys at the helm of affairs should consider all these factors before going for the merger mantra

I do not support the view. Merger and consolidation should be based on the synergies optimization, utilizing capital, RORA, etc.

1. Some of the PSU banks were region based AND the merger with other banks from a different region may not generate growth.
2. I do support the merger and consolidation of SBI Group within State Bank of India but not other PSU Banks.
3. For economic growth, competition is a must and merger of profit making PSU banks is not expected to generate competition especially Region based banks.

If you compare the growth of Axiz Bank & HDFC bank with the growth of other PSU banks, it would be amply clear that Growth does not depend upon the merger but depend upon the ability of the banks to generate revenue growth.

Nagarajan 

The banking industry is growing and  competition exists with other international banks.This is a positive thought to have banks work in much better ways and efficiently can sell their services based on customer needs where its has become a buyers market than a sellers market.

since there are variety of banks with different offers  and the money starts flowing into the banks that perform well  with thoughts of  the peoples needs.

Economy of scale also has some limitations and it has to maintain some balance with the infrastructure needs to efficient functioning.

Now that SBI and PSU's are much larger enough and they find difficult to match the private banks like ICICI and other private banks who have reasonabily good infrstructure to services needs.The public sector bansk need mor etime to sort these issue first before merger and be more competitiveamong the banks in India rather than ask ofor merger just to have more capital base  in the name of saving the overheads.

I feel its not required at all as it meets every ones requirement to function at the present moment.

More competition more generation of profits , more capable people becoming CEO's and challenging the biggest giants.this would serve more people i many different ways as per different choices of people and tastes.

We know the fate of USA GIANTS AND ALSO OF ANOTHER WESTERN BANKING ORGANISATIONS.MERGERS IS NOT ALWAYS THE BEST OPTION. This is good when one need to cover up losses of smaller players and that too,  IN CASE the bigger fish IS in a position to digest losses . BETTER MANAGEMENT IS AN ANOTHER CAUSE...BUT WHO MUST TO DESCIDE THE MERGER AND WHY>

What happened to the giants in USA and UK? Is it not an eye opener, if not so , why?

State bank of INDIA IS A GROWN UP IN PROPORTION AND IS ALREADY A VERY BIG ORGANISATION AND SHOWING DISATVANTAGES OF LARGE SCALE OPERATIONS WHICH INCLUDES INDIFFERENCE, IMPROPER MANAGEMENT, WHO CARES, RESPONSIBLTY ATTRIBUTIONS, ACCOUNTABILTY AND MANY OTHE INEFFICIENT OPERATIONS RELATED TO HUMAN JUDGEMENT AND DECISIONS

I agree, mergers and consolidations are needed in the interest of the economy. The Indian Government is not forcing this merger by the State banks because of the reason that suitable clauses which are incorporated in the scheme of amalgamation/acquisition to the pay and allowance or the compensation of merging entities are not altered to their disadvantage of the employees, the owners/shareholders and the customers constitute stakeholders of the banks. These kind of mergers does not help in growth of the banking industry.