Rather than being an exception, merger and amalgamation of banks have become a norm in current times. In fact, amalgamation of several banks has taken place in recent years, which is aimed at facilitating consolidation among PSBs (Public Sector Banks) to create competitive and strong banks which are capable of achieving economies of scale and realisation of synergy benefits with wider product and service offering for customers.
For instance, the amalgamation of Vijaya Bank and Dena Bank into Bank of Baroda (BoB), effected on April 1, 2019, is a case in point. And now the mega merger of 10 PSU banks into 4 large entities has come into effect from April 1, 2020. The amalgamation of PNB (Punjab National Bank), UBI (United Bank of India) and Oriental Bank of Commerce, which came into effect from April 1 this year, will create the second largest nationalized bank of the country — both in terms of business and branch network. Similarly, Syndicate Bank has been merged with Canara Bank, while Allahabad Bank has been amalgamated with Indian Bank, and Andhra Bank and Corporation Bank has been consolidated with UBI.
However, while such mergers and amalgamations may be good for the concerned banks, but sometimes they also make the employees and customers of these banks wary. Employees start thinking what will happen to their job, whether their job will remain safe of not post the merger. On the other hand, customers get concerned about their deposits and the subsequent disruptions in banking activities, like how their EMIs will get cleared, whether they will have a get a new cheque book, etc.
Industry experts, however, say banks usually try to ensure minimal disruption for consumers while implementing mergers. However, as some changes are inevitable, depositors and borrowers of the merged banks should keep a close eye on all communications received from their banks post-merger.
“Any change in their account number, branch name or IFSC code post-merger would have to be updated with their third party service providers like mutual fund houses, insurance companies, NBFC/ HFCs, etc. Those expecting IT refunds would have to update their account details with the Income Tax Department,” says Naveen Kukreja, CEO & Co-founder, Paisabazaar.com.
The mergers may also lead to rationalization of the branch networks over a period of time. This may lead some of the existing branches to shift or close, thereby causing some inconvenience to those having locker accounts or those requiring frequent visit to branch premises for making cash deposits and withdrawals and availing other services. Many of these customers may have to transfer their accounts to the nearest branch of the merged bank or shift to another bank.
Consumers should also closely monitor the product features and charges schedule of the various accounts and banking services availed by them. Any adverse change in them post-merger may require such consumers to shift to another bank offering the same services at a lower cost.
“As far as the existing fixed deposits and recurring deposits with the merged banks are concerned, consumers will continue to get the same rate of interest till the renewal of their fixed deposits. Similarly, existing home loan, personal loan, education loan and other floating rate loan borrowers will continue to repay existing rates till the next reset date of their loan interest rates. If the rates change adversely on the loan reset date, then such borrowers can transfer their loans to other banks or NBFCs/HFCs charging lower interest rates,” says Kukreja.
Source: Financial Express