BANK Employees Federation of India (BEFI) and All India Bank Employees Association (AIBEA) have given a joint nation-wide strike call on October 22 opposing the proposal made by Finance Minister, Nirmala Sitaraman to merge ten public sector banks (PSB).

Calling the merger as a step closer towards privatisation of public sector banks, the unions sought the government to stop imposing neo-liberal banking reforms and demanded that it should ensure recovery of bad loans along with strict action against defaulters.  The unions also demanded that the customers should not be harassed with penal charges and that the services charges should not be increased. They also demanded that the interest rates on deposits are increased. Job security and adequate recruitment in all banks are also demanded. 

The union leaders recalled that since the onset of neo-liberal economic reforms regime in the early 1990s, successive governments have had privatisation of PSBs as a common agenda and that the merger is a step towards the implementation of that agenda. They noted that numerous committees beginning with the Narasimham Committee – I in 1991 to P J Nayak Committee in 2014, have been formed to find out the ways and means to achieve the task.

Two common recommendations made by the above committees; to reduce the number of PSBs through the process of merger, amalgamation or consolidation and to reduce the share-holding of the government in PSBs are being implemented by the present government in power and there is not an iota of doubt that the merger of PSBs is only a step towards their ultimate goal for privatisation, the union leaders stressed.

The government’s claim that a big bank would necessarily be ‘too big to fail’ is no more than a myth. During the global financial meltdown of September 2008, scores of global financial giants in the United States and other advanced economies of western world had crushed like ninepins overnight. Many of those financial giants had in their respective command, before they crushed, assets more than 100 times than any of our ‘small’ PSBs.

The unions reminded that it is not the size of the bank but the extent of control that guarantees the continued and robust survival of a bank has been amply demonstrated by the global crisis of 2008. In fact, stringent supervisory and regulatory control exercised by Reserve Bank of India (RBI), the Central Bank of the country, and the Parliament (acting through the Standing Committee attached to the Ministry of Finance) have ensured that our PSBs run strictly for public purpose and social obligations set for them and do not run for high yielding speculative ventures and toxic assets, they reminded.  Parliamentary and RBI control, even though somewhat diluted under the neo-liberal regime, thus provided the insulation and an insurance cover against bank failures.

Debunking the government’s claim that the merger will create banks big enough to take up challenges globally, the union leaders said that after the mega merger of seven associate banks and Bharatiya Mahila Bank with SBI, the merged entity (SBI) ranks, asset-wise, a poor 57 in the list of top 100 banks in the world. Even if all our PSBs are merged to create a so-called large Bank, it will come, asset-wise nowhere near the top 20 Banks in the world. Hence challenging global competition through merger is nothing but a big joke, they said. 

The unions added that the recent merger of the associates of SBI with the parent body, SBI, also has revealed that mergers do not lead to an increase in profitability. Total net bad loans of SBI were Rs 58,277 crore and that of the Associate Banks was Rs 38,655 crore. This makes a total of Rs 96,932 crore, as on March 31, 2017. On March 31, 2018, total bad loans of the merged entity, SBI, shot up to Rs 1,10,855 crore  and this is after provisioning, mainly for the non performing assets (NPAs), a whopping Rs 66,058 crore out of operating profit of Rs 55,436 crore on the even date. Merger, thus, pushed the volume of bad loans by more than 14 per cent upwards. In real terms, accumulated bad loans are much higher. And for the first time in its history of more than a century, the SBI has recorded a net loss of Rs 6,547 crore as on March 31, 2018, followed by a net loss of Rs 4,875 crore in the quarter ending on June 30, 2018, juxtapose it to a net profit of Rs 10,484  crore earned by pre-merger SBI as on March 2017, they said.

The story of NBOI merging with PNB is no different. In 1993, RBI forced NBOI, under Section 45 of the Banking Regulation Act, 1949, to merge with PNB, as the former faced serious liquidity crisis. PNB was a very strong bank, having good track record of netting profits every year. However, just the next year, after merger, it recorded a loss of Rs.96 crore. An efficient PNB took a couple of years to come out of the after-effects of a forced merger. Similarly, the merger of privately owned Global Trust Bank, then a new star of financial liberalisation, with state owned Oriental Bank of Commerce in 2004, seriously affected the earnings of OBC, the union leaders recalled.

An internationally acknowledged and reputed management consulting firm, McKinsey & Company,  having conducted a survey across a range of industries, geographies, and deal types and having accumulated data from 160 mergers, observed,  that the area of greatest estimation error is on the revenue side—a particularly unfortunate state of affairs, since the strategic rationale of entire classes of deals, such as those pursued to gain access to the target customers, channels, and geographies, is founded on these very synergies. Nearly 70 per cent of the mergers in our database failed to achieve the revenue synergies estimated by the acquirer’s management. There is also the loss of customers, and closures of branches and retrenchment of employees. The only success that is readily achieved through merger is the cutting of cost by closure of branches and reduction of staff, the employees stressed. 

From the experience of merger of State Bank group (SBI & its Associates) and Bharatiya Mahila Bank, we have seen the closure of more than 2,000 branches and off-shedding of more than 10,000 of manpower within less than 2 years; more closure of branches and reduction of staff-strength are in the pipeline. Post-merger, Bank of Baroda too have been working on a plan of drastic closure of branches and reduction of staff. The merger of other PSBs cannot be expected to produce any different result, the unions reminded. 

The union leaders cautioned that in any scheme of merger, customers are the first batch of victims. By closing many branches they are rather deprived of their choices or preferences for receiving services from a particular bank or branch. There is often a lack of cultural assimilation for both the employees and customers. Banking is quite different from other industries; it is based on the close relationship between the bank and its customer. When a bank gives someone a loan, it should have an idea about the borrower. Even bank can advise its clients on what type of saving one should go for. This very personal touch and communication between the Bank and its customers becomes the first casualty when the banks become too oversized to sustain that touch and relationship.

Merger of Banks pose another danger for our economy, afflicted, as it is, with unbearable crisis of unemployment. With the advent of the concept of mass banking, and consequent spread of branch network throughout the nook and corner of the country since nationalisation of banks in 1969, banks have been a major source of employment for the ever growing army of our unemployed youth. Total manpower, workmen and officers taken together, of our PSBs rose to over a million (10 lacs) in early 1980s from of strength of 2 lacs prior to nationalization. Through the route of voluntary retirement scheme and non-filling up of vacancies caused through natural erosion (superannuation, death, etc.) the same has by now been reduced to less than 8 lacs. Further cut in staff strength through merger, when creation of employment opportunities through expansion of branch network is the need of the hour, is a crime against our youth, nay against the nation and its economy, the unions stressed.

Our banks command an astronomical Rs 127 lakh crore of combined asset-base; more than three-fourths of this is in the hands of the PSBs. The big corporates, who have contributed thousands of crores of rupees to ensure electoral victory of the present ruling party, have been ogle-eyed over this enormous assets; the government too appears to be more than willing to reciprocate. Their game-plan is to reduce the number of banks through merger, then to cut-off the close touch and communication between the staff and the customer through reduction of the number of branches and of staff, then to create a negative public image of the PSBs through planned deterioration of the quality of service caused by shortage of staff and over-burdening of the branches caused by closure and, through all these, to create a favourable atmosphere for privatisation of PSBs, the employees said.

Vijay Mallya, Nirav Modi, Mehul Chokshi and the likes have earned the dubious distinction of leaving the country defrauding thousands of crores of rupees off our PSBs. The government itself has officially revealed that so far as many as 36 such fraudsters have abandoned with more than Rs 1,00,000 crore. What the government has not revealed is that 28 of those 36 fraudsters are personally close to a few high and powerful in the present set-up at the centre. One can easily imagine the consequence if and when the ownership of the PSBs is handed over to those great ‘stars’. Our senior citizens, more particularly the very senior ones, can very well recollect the era of Private Banking when the greedy and dishonest private owners of Banks used to close the shutters of their respective Banks overnight causing destitution and penury of lakhs of common man robbed of their hard earned money and thousands of employees (including officers) jobless.

The Bank employees, including officers, have relentlessly been opposing and fighting against neo-liberal reforms of our financial sector, including merger of PSBs. But situation today calls for a more united and widespread struggle against the evil machinations of the central government. Howsoever strong a government might be, the united will of the people always prevails. It is a matter of great inspiration that the united might of the banking sector employees and all other sections of the working people forced the central government to withdraw the Financial Resolution and Deposit Insurance Bill 2016 (a bill to confiscate and/or disown and/or delay repayment of a depositor’s money to compensate for the loss caused by non-repayment of loans by the few willful defaulters) even after the introduction of the same before the parliament for approval and enactment.

The leaders added that ensuing countrywide bank strike is a step forward in the march of the bank employees in defense of PSBs. The struggle path, they have been traversing for more than three decades with the support of fraternal organisations, has to be further widened and strengthened to defeat the pernicious move.