Babu Beat. The human impact of big-bang bank mergers

Finance Minister Nirmala Sitharaman has maintained that there will no job losses due to bank mergers . But the reality is that any merger, amalgamation, acquisition or takeover always has an impact on manpower.

Soumya Datta, general secretary of the All India Bank Officers’ Confederation, is categorical that the merger move will lead to job cuts.

On August 30, when Sitharaman unveiled a plan to merge 10 public sector banks — Punjab National Bank, Canara Bank, Union Bank of India, Indian Bank, United Bank of India, Allahabad Bank, Syndicate Bank, Corporation Bank, Oriental Bank of Commerce and Andhra Bank — into four entities, the reactions were mixed.

Read | Will the big bank mergers work: An in-depth analysis

Some felt it was a reformative step and would usher in efficiency. Others were worried about the impact on workers. Datta says he fears “the number of branches will be reduced in the name of branch rationalisation. Human resources required will be understated, under-projected consciously to show to the powers that be that mergers result in savings.”

He also worries that in the name of right-sizing staff or citing cultural fit problems, a voluntary retirement scheme may be offered, just like in the case of the merger of associate banks with State Bank of India. “A huge exodus of senior experienced personnel happened,” says Datta.

Offering VRS is nothing but an instigated retirement, the Unions argue. “Recruitment at ground level certainly takes a hit, while banks resort only to cosmetic recruitment, perhaps at a higher level in the hierarchy, to show that there is no impact,” says Datta.

DK Mittal, former secretary, Department of Financial Services in the Finance Ministry, is of the view that mergers should be undertaken based on well-thought-out plans. As he says, “Human Resource is the most important component to make any merger successful. A detailed exercise to assess impact of merger and steps needed to mitigate any adverse impact has to be undertaken before taking any such decisions.”

Abizer Diwanji, Partner and National Leader – Financial Services of EY India, stresses that “It is very important that employees are taken into confidence. Besides, there should be a mechanism in place where the best Human Resource Practices of each bank are adopted.” In fact, if best Human Resource Practices of the banks were adopted, issues like employees being forced to leave will not happen.

Ashwani Rana, Vice-President of the National Organisation of Bank Workers, says, “Circumstances force employees to leave the bank. For example, after a merger, there will be closure of administrative offices and common branches, which leads to deployment of excess staff at these offices/branches. If staff get convenient posting, it is okay, otherwise they will leave the job.”

He too cites the case of associate banks merging with SBI. A lot of employees work in remote places but the bank management is not considering their request of transfer because most of them are from associate banks, he says.

Strong words are used by CH Venkatachalam, General Secretary, All India Bank Employees Association, who says, “The merger of banks is a diversion from the economic crisis. On paper, banks will be merged. The technology platform will also be merged. But the Human Resource integration is very difficult.”

His worry is that since service conditions and HR policies differ from bank to bank, a senior person may lose on promotion opportunity after merger. As he says, “Government has assured that any good welfare scheme in one bank will be applicable to all after merger. But past experience (State Bank and associate banks) shows otherwise.”

According to Mittal, “Human Resource issue has to be handled at various levels. To begin with, the number of Managing Directors will be less and there will be compression in promotion avenues. With branches and regional offices’ relocation, there will be an impact on promotion prospects of middle and junior levels. Reconstitution of the boards of the banks is the need of the day.”

So what is the way out without political interference?

The unions suggest opening more branches, infusing capital, augmenting human resource, and compensating them rationally for all the transactions done on behalf of the government.

According to Mittal, “A policy should be drafted which would spell out manpower requirements at each level. In fact, lessons should be learned from the private sector banks as well — where there is just one man at the top (CEO or MD) but there are vertical heads. The board of the bank needs to be more professionally managed and there should be fixing of accountability.”

Mittal suggests a slew of measures, including bringing the CTC (cost to company) of top leadership at par with private sector, incentivising employees, and fixing the tenure of the top man for not less than five years. “Without full package of actions, merger will give very sub-optimal results,” he stresses.

There is still time. It would be better if the government called all stakeholders — bankers, trade unions, customers and shareholders — for discussion before pushing the mergers through.

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