Money & Banking

‘Move is a precursor to privatisation of banks’

Mumbai | Updated on August 30, 2019

While top bankers welcomed the government’s decision to consolidate 18 public sector banks into 12, employees unions said the move is a precursor to privatisation of these banks.

SBI Chairman Rajnish Kumar said the government’s announcements on bank mergers is a cohesive and a clear recognition that bigger banks have that much more ability to absorb shocks, reap economies of scale, as well as the capacity to raise resources without depending unduly on the exchequer.

“The decision to have separate mechanism for sanctioning and monitoring of big loans will ring-fence the banks against potential frauds.

“Further, the decision to empower Bank Boards and operational flexibility in hiring from the market will prioritise robust risk management practices in decision making,” Kumar reasoned.

PS Jayakumar, MD and CEO, Bank of Baroda, observed that the combined institutions will be better than the earlier institutions, a sum of the whole. Once the business purpose is established, there is something for everybody to rally around.

“Acceptance for what is best for the breed and the employees, regardless of where the idea came from, is critical. The employees of the larger institutions, treating the other as equal is very critical,” he said.

S Nagarajan, General Secretary, All India Bank Officers’ Association, emphasised that the government should have had a debate in Parliament before announcing the amalgamation as public sector banks are governed by the Banking Companies (Acquisition and Transfer of Undertakings) Act, which has been passed by the Parliament.

Published on August 30, 2019

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