The Hindu Business Line : Merger fright

Leveraging union power to get better compensation would serve the employees of the associate banks of the State Bank of India better than simply opposing any merger.

As if inspired by mergers and acquisitions in the private sector, those managing the associate banks of the State Bank of India seem in the mood for merging with the parent bank. The move has been hanging fire for long and may have already cost the largest bank in India dear. Overall, the banking business in India has grown at a healthy 20 per cent a year since 2002 but, pertinently, the new private banks have grown faster at 35 per cent. Competition has also redistribut ed market share, with the State Bank of India and its associate banks’ share declining four percentage points to 24 per cent while the share of the new private sector banks together has nearly doubled over the same period.

When the boards of the associate banks meet late next month, this trend in market share should govern their decision to act sooner than later. Private sector banking business, which has grown from 9 per cent in 2001-02 to 16 per cent as of March 2006-07, will pick up in over two years from now with more foreign banks muscling in; the field-levelling will strip public sector banks of the precious protection they still enjoy. Bank boards may have seen the light already; obdurate employee federations clearly have not and plan to strike work late next month. Mergers tend to upset units being absorbed, but that does not justify a unilateral rejection of absorption. Unions must view the occasion not as a threat to the employees but as an opportunity for bargaining. Parity in wages, benefits and seniority — issues that involve non-discriminatory absorption of employees — mean dialogue and that is what employees must insist their unions engage in.

Already private sector banks are paying better salaries based on merit, which has enticed skilled talent from the PSBs. If PSB managements want changes in the recruitment policies to allow for bank-wise pay norms, employees should see merit in it. Under the circumstances, leveraging union power to get better compensation would serve the employees of the associate banks better than simply opposing any merger.

Change is a threat to some but an opportunity for all. So far, unions have banked with the status quo, viewing change with fear. Yet, change has benefited employees — for instance, computerisation has upgraded skills and productivity. PSBs are planning to hire professionals for specialised jobs and that trend will continue as banks seek ways to stave off competition. Employees would do well to learn that negotiations work; obduracy over critical issues may turn a winning moment into a lost promise.

Related Stories:
New private sector banks growing faster than the industry
Boards of 6 SBI associates to consider merger move on Jan 25
SBI staff body to oppose merger of associate banks

More Stories on : Editorial | Public Sector Banks | Mergers & Acquisitions

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