The Hindu Business Line : Public sector banks and merger plans

The total business of top-ranked banks has already crossed one lakh crore of rupees. Despite a fall of Q4 income as compared to previous Q4 in some of the banks, overall they have put up a strong show in achieving average 22 per cent growth.

The increased profitability has come about despite stiff competition among the banks themselves, inflationary conditions rocking the country, revised Accounting Standard AS-15 of ICAI calling for provision of transitional liability in respect of employee benefits and, of course, high cost of funds mobilised at management’s discretion.

Going by published results, when many banks can achieve sustained growth, even proposing to increase their capital base, one wonders where is the need for the merger of banks, as proposed by the Finance Ministry. Also, going by employee cost to the bank, around 10 per cent of total expenditure in some banks, there are two possibilities bank managements can consider.

One is to increase the workforce, which is already thin in some bank branches. Attrition fever grips the banking industry too, where senior and experienced work-forces leave the job for better environment. Second, and importantly, PSB managements and negotiating bodies should revise upwards their wage structures to provide for parity with private counterparts.

When this is done, with some amendments in HR policies regarding employee output, why cannot PSU banks demand competency from their employees? Therefore, one should hope they raise the standards by improved quality rather than being pressured by merger plans.

B. N. Iyer Chennai

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Public sector banks and merger plans