My opinion is against merger and consolidation of Bank at this stage when almost all banks are exposed and suffering due to unabated and consistent increase in bad loans called as Non Performing Assets . Gross NPA has crossed 10 percent in all bank's. Bankers are busy in recovery of dues from defaulters. Credit offtake is either poorest or the worst quality wise in all bank's either due to dirty politics or due to unskilled banking or due to rampant corruption at all levels or due to bad policies or due to bad management .
Under present framework banks cannot reduce NPA. They can at best write off and enter into compromise settlement with bad borrowers and seek capital infusion from government as they have been doing for last ten years and more.
Quality of manpower is poorest and promotion takes place on basis of flattery. Politicians continue to exploit banks for vote bank. This culture is very old and deep rooted. As such NPA cannot be expected to fall, rather it will continue its uptrend .
Quality of manpower is poorest and promotion takes place on basis of flattery. Politicians continue to exploit banks for vote bank. This culture is very old and deep rooted. As such NPA cannot be expected to fall, rather it will continue its uptrend .
Anyway government is bent upon execution of its merger plan. It is choice of the government. I am helpless. I cannot stop it but put before you my little suggestions.
I will simply say that growth has already suffered erosion partly due to demonetisation and partly due to GST. Bankers at field level have been avoiding fresh sanction of loan. Once you sanction merger plan, all bank's will face confusion and chaos. Officers working in banks will get one big excuse to avoid lending . Without credit growth one cannot dream of GDP growth.
If GDP growth comes down further , opponents of BJP, voters and media will get additional opportunities to critise a good government and pull government down. Please avoid at least for few quarters so that impact of demonetisation and GST become zero and economic condition improve to pre- demonetization level.
Merger of banks will spoil banking at least for a year. All cases of recovery of loan in courts will be delayed further by a year or two. It will simply add fuel to fire. Banks will save some expenses by closing surplus branches but spend more in introducing new stationary and new software.
In place of merger, you can frame uniform loan policy and interest rate structure for all bank's and branches as if they all are government bank . After merger only name will change, attitude and culture will not change.
Merger will rather shield all corrupt officials and politicians and cause dangerous erosion in quality of lending and quality of management. Top officials will get an easy excuse for all bad lending gone by them and all hidden NPA will surface . Rating of banks will come down sharply.
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