Let’s look in
to the merits and demerits of merging of State Bank Group
Merits
1.
Avoid
Duplication: This is the one of the main reason the management is putting in
favour of merger. A person may have account in both SBI and Associate Bank.
Most of people open a secondary account to get government payments like LPG subsidy,
kerosene subsidy, MNREGS payments etc. In such cases both banks has to provide
Passbook and other banking facilities to such persons. If the banks were merged
together and form a single entity, the customer has to depend only on one bank
and the operating costs comes down. Also in most areas branches of SBI and
Associates functions within a radius of 100 meters. In such cases one branch is
enough to serve the customers after merger.
2.
Monopoly:
The merging gives SBI monopoly in banking in several states in India. Each of
the Associate Banks are enjoying a good market share in corresponding states.
When these banks are merged, SBI’s market share will increase considerably and
gives monopoly over other banks in formulating products and services.
3.
Research
and Development: Even though all banks in State Bank Group use same
technological platform, the software and all the technology used in banking has
to be customised as per the requirement of each Associate Bank. This creates
additional cost for the banks. After merging, this cost can be saved.
4.
Increase
Size: As usual the merging increases the size of the SBI to a great extent, as all
Associate Banks have more than 500 branches. All these branches adds to SBI to become
a giant bank.
5.
Reduces
Operational Cost: All Associate Bank has several departments like Core Banking,
Tax, Treasury, Vigilance, Personal Administration etc. as all are having
business of thousands of crores. After
merger, instead of maintaining individual departments for each bank, departments
for a single bank is enough. This reduces staff and other branch related costs.
Demerits
1.
Reduces
choices for customers: Since this merging reduces number of banks, the customer
dissatisfied with the service of one bank has a little choice to select another
bank in his locality. Also SBI is opening branches more in urban areas than the
rural areas. So the people of rural areas have to travel long distance to do
banking.
2.
Reduction
in Employment: Since the number of banks get reduced, the job opportunities
also get reduced. After merging, only SBI hire people.
3.
Distress in Employees: The unions have already
created a bad image for SBI in the minds of staffs of Associate Banks and also
for the public. After merging, the staffs (not all staffs) of Associate Banks
will work with less commitment to the new bank than the previous Associate
Bank. Some bridging sessions in training will make the conditions better.
