Money & Banking

Unions oppose proposal to merge three lenders

Our Bureau Mumbai | Updated on September 17, 2018 Published on September 17, 2018

Say the amalgamation of Bank of Baroda, Dena Bank and Vijaya Bank will not solve the issue of NPAs in the banking system

 

Bank unions say they will oppose the proposed amalgamation between Bank of Baroda, Dena Bank and Vijaya Bank, claiming the move is anti-people and will not help solve the bad loan problem facing the banking system.

Bad loan recovery

Given that recovery from bad loans is the need of the hour, the unions’ contention is that it will take a back seat once amalgamation between the three public sector banks is initiated as their top brass will be bogged down with the administrative nitty-gritties of consolidation.

Further, since Bank of Baroda (BoB) and Dena Bank, which is under the RBI’s so-called prompt corrective action framework (PCA) due to its huge bad loans and weak financial ratios, have a large network of branches in Gujarat, the fear is that there could be massive rationalisation of branches in the State.

Recalling the disastrous consequences of the first amalgamation in the public sector banking space, the leaders said when New Bank of India – which was a weak public sector bank – was merged with Punjab National Bank in the mid-80s, the latter took a long time to return to black.

The same was the case when the erstwhile Global Trust Bank (a private sector bank) was merged with Oriental Bank of Commerce (a public sector bank) in 2004.

“This (proposed amalgamation) move will not address public sector banks’ present problem of non-performing assets. At a time when we need more branches and financial inclusion, the amalgamation will lead to closure of branches, which is not good for the development of the country and is anti-people,” said CH Venkatachalam, General Secretary, All India Bank Employees’ Association.

In this regard, Venkatachalam pointed out that State Bank of India’s bad loan woes got exacerbated after it acquired five associate banks.

S Nagarajan, General Secretary, All India Bank Officers’ Association, said the argument that mergers will help tackle bad loans does not hold water. While it may make sense to amalgamate Vijaya Bank and Bank of Baroda as both banks have relatively strong financials, including Dena Bank in the consolidation exercise is fraught with pitfalls, he added.

A senior banker said that with the amalgamation announcement, the government may be moving a step closer to implementing the Narasimham Committee recommendation on structural reforms.

Protest planned

All India Bank Officers’ Confederation General Secretary DT Franco said bank employees and officers, under the aegis of the United Forum of Bank Unions (UFBU), the umbrella body of nine trade unions in the banking sector, will be holding demonstrations in all State Capitals on Tuesday to oppose the amalgamation move. UFBU will also take a call soon on going on strike.

Published on September 17, 2018
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