Canara Bank Chairman: Consolidation is the way forward for Indian banking industry
Merger with Syndicate Bank will be seamless and there will be no job losses, says TN Manoharan
The domestic banking industry is facing challenging times. But, unlike their foreign peers which collapsed during the global financial crisis, Indian banks have stayed afloat, thanks perhaps to their conservative approach and strong fundamentals, said TN Manoharan, Chairman, Canara Bank, in an interview. Excerpts:
What are your views on consolidation and mergers?
Consolidation is required for two reasons. One, Indian banks are not large enough to compete with their global peers. There is therefore a need for increasing the size of operations and reach. Instead of 20-odd small banks, consolidation will pave the way for bigger and larger entities which can compete globally. Two, all public sector banks (PSBs) are government-owned entities. With too many in number, it can trigger unhealthy competition. A merger will synergise and synchronise the advantages in the consolidated entity. That’s the way forward.
When do you expect to complete the merger process with Syndicate Bank?
Canara Bank and Syndicate Bank will come together and emerge as a stronger bank by the end of this fiscal. Canara Bank’s business is over ₹10-lakh crore and Syndicate Bank’s is over ₹5-lakh crore. The merged entity will have a total business of over ₹15-lakh crore and a network of 10,000-odd branches.
System integration, share allotment etc will all be seamlessly done. The merger process is expected to be completed by March 31, 2020. From April 1, the merged entity will be in operation.
Do you foresee any job loss or lay-off due to the merger?
There are apprehensions, but the answer in ‘no’. If you look at Canara Bank’s growth trajectory over the last five or six years, technology has been adopted, core banking services, internet banking, mobile banking etc have come into play. More than 75 per cent of the transactions are happening via the net. The strong digital push has not stalled the bank from recruiting people. Five years ago, we were 45,000; today we are a 60,000-strong team. We have recruited more than the numbers that are retiring every year. Neither automation nor digital banking has resulted in job losses.
But recruitments happen at the lower level. What about job loss in the mid-management and senior level?
The government has wisely identified such issues. Many senior people are on the verge of retirement; so that will get adjusted automatically. The problem has two solutions — creating a new layer in the hierarchy and then there is multi-vertical specialisation in banking.
The government has created a hierarchy in PSBs. At present there is Scale I to Scale VII. They have created a Scale VIII because of the mergers, and designated it as Chief General Manager (CGM). For every four chief managers, the bank is allowed to promote and appoint one CGM. The new position in the hierarchy is also happening simultaneously. So, before the merger process is completed, these appointments will also be made.
Today, treasury operations are handled by one GM. But, with consolidation, we may need more GMs. For the same position, we may need more than one person to divide and share responsibilities.
What about rising NPAs?
Yes, the asset quality of the loan book is coming down. Top priority is assigned to the quality of the asset. Even in rural lending, the enforcement of the Insolvency and Bankruptcy Code (IBC) has brought in regulation and discipline. There has been no deviation. Even a small default, of more than ₹1 lakh, can land them with the NCLT (National Company Law Tribunal).
To what extent has the waiver of agriculture and educational loans impacted the bank’s business?
These are political/governmental decisions. Whenever such announcements are made, the State governments get in touch with the bank management to understand how the repayment will be done. The State governments provide a road map. It will be a recovery from the government.
Has credit offtake gained momentum?
Growth momentum has not picked up. It is slow but steady and I expect it to be like that for some more time. GDP growth has fallen from the government’s estimate of 7 per cent. This is all happening because of the various reforms that were introduced. The economy is getting adapted to the reforms. It will take time.
In a large economy such as ours, moving from cash to digital system, from unorganised operations to an organised one, from unregulated economy to regulated economy can be a painful transformation. It may last another year. Then the momentum will become robust and there will be no turning back. The reforms will start bearing fruit after three or four quarters. Credit growth is happening in a cautious way.
But capacity utilisation levels have dropped, there is an economic slowdown. How do you say that in such a scenario credit growth is happening?
Earlier, the growth was on account of corporate loans. Now, the focus has shifted to retail, home, personal, educational, automobile loans, etc. This is a transitional phase.
Do you think this is the right time for bank mergers? First there was demonetisation. Before the dust could settle, GST was rolled out. Now it is bank consolidation. Is the government pushing reforms in a haste?
In a large country like India, if you wait for the dust to settle on each of these reforms, you are losing critical time.
On the infusion of funds...
The government recently infused ₹6,500 crore. This has given us a good impetus. The government is supporting the banks, but it is not ad hoc infusion of capital. It is monitored, regulated and there is accountability.