Submitted By : Subhra Ghosh (Department of BBA (Batch : 2019-2022))

Bank nationalization in 1969 unfolded a new horizon in the annals of Indian banking. In the past half century period the world and the country has witnessed many changes  that transformed the hopes, ideas, and aspirations of the world community including India. The Big Bank concept was mooted first by Narasimham Committee in the 90’s and it’s final implementation haws now been undertaken by the present Government.

                     We know that the country is going through an acute state of stagnancy and dwindling GDP growth. Industrial growth has come to halt, particularly  in automobile and real estate sectors, and further loss of job looms large. Simultaneously, the GOI’s call for a 5 trillion dollar economy in the next 5 years has pushed the in the embarrassing situation. In the above context of lure of strong and big PSBs has goaded the GOI to go in for further consolidation of PSBs as declared on 30 August, 2019.

         In 2017 there were 27 PSBs in the country. In the 1st phase SBI took over its 5 Associated Banks along with INDIAN MHAHILA BANK.  Thereafter, DENA BANK and VIJAYA BANK were merged with BANK OF BARODA with effect from 1st April,2019. So the declaration of the GOI on 30 August ,2019 for the latest phase of consolidation wasn’t unexpected. In the 3+3+2+2 Model of merger, the PNB will take over ORIENTAL BANK OF COMMERCE and THE UNITED BANK OF INDIA to make the 2nd  largest bank within 11437 branches and a business profile of Rs.18 lakh crores. After the total proposal was implemented the 10 banks will be merged into 4 and the total number of PSBs will come down to only 12.The GOI will pump in Rs. 55250 crores to augment the capital base of merged entities and help them withstand the challenges of massive NPAs. In other words, this fund will actually be utilised to bail out Corporates through compromise settlement or otherwise.

                 The GOI and the exponents of the merger concept hope that with infusion of the fresh capital, reduction in managerial; costs and enhancement of risk absorbing capacity of the big sized Banks will stand up with more vigour and versatility. It has also been pointed out by them that in the 1st quarter of the current year as many as 14 PSBs have earned profit. It has also been propagated by them that as a result of the earlier phases o consolidation not a single employee has dislodged from service.

             They Further opined that the declared advantages are simply misquoted. They added that simply adding 2 Balance sheets will not necessarily make them stronger. In the name of rationalization and rightsizing of human resources, voluntary retirement is offered which they feel bis nothing but “instigated” termination of service and loss of employment to millions. This will cascading effect on customer service depriving banking facilities to the common people. They further felt that “merger would result in driving the loyal customer’s of PSBs to the fold of new generation Private Sector Banks and NBFCs which will inimical to the interest of the common man”.                 “The core problem of Indian Banking Industry is the enormous pile up of NPA that have accumulated on account of faulty lending practices and absence of any effective strategy to recover the amounts from corporate houses and large borrowers”. Absence of strong penal actions against the corporate willful defaulters fraudsters reflect the lack of political will.

                     As we know 45 RRBs of the country cover all States(expect Goa) with a branch network of more than 23000 and staff strength of over 1 lakh. Business volume of RRBs now exceeds Rs. 8 lakh crores involving more than 30 crore small accounts. As many as 35 RRBs were in profit as on 31.3.19.

RRBs alone organised and credit linked over 32 lakh SHGs and issued loans to them of the  order of Rs. 20000 crores. CD Ratio of RRBs always hovered around 65% Borrowings from outside (NABARD and SPONSOR BANK) stood at Rs. 60000 crores while the loans were over 3 lakh crores. The figures clearly confirm rapid exodus of hard earned rural deposits of RRBs to urban areas through their masters and competitors in the field as the sponsor banks happen to be.

      In the current scenario of consolidation of PSBs, delinking of sponsor banks from the RRBs has become an urgent necessity as may be seen from the example.