Big bank theory: On Public Sector Bank mergers

Big bank theory: On Public Sector Bank mergers

For the mergers to work, realising staff cost synergies is key
For its sheer(विशाल/परिपूर्ण ) magnitude(परिमाण /मात्रा), the scale and the ability(क्षमता) to disrupt(बाधित ) the status quo, the mega bank mergers(विलय ) announced by Finance Minister Nirmala Sitharaman on Friday must go down as the most significant(महत्वपूर्ण) the banking industry has seen in the five decades since nationalisation(राष्ट्रीयकरण ). The bottomline is clear: to create banks of global level that can leverage(लाभ उठाएं/उत्तोलन) economies of scale and balance sheet size to serve the needs of a $5-trillion economy by 2025. The jury is, of course, out on whether this strategy(रणनीति ) will succeed(सफल ). Mergers are driven(संचालित ) by synergies(सहक्रियाओं/सहयोग ) — in products, costs, business, geographies or technology and the most important, cost synergies. While there may be some geographical synergies between the banks being merged, unless they realise(एहसास ) cost synergies through branch and staff rationalisation(युक्तिकरण), the mergers may not mean much to them or to the economy. This is where the government’s strategy will be tested. It is no secret(गुप्त) that public sector banks are overstaffed. There is also bound to be overlap in branch networks such as in the Canara-Syndicate Bank merger, especially(ख़ास तौर पर ) in Karnataka and a couple of other southern States. Ditto with Punjab National Bank and Oriental Bank of Commerce, both of which have strong networks in the north and the west. The success of these mergers, therefore, will hinge on how well these banks handle the sensitive(संवेदनशील ) issue(मुद्दा) of staff rationalisation. The All India Bank Employees Association has already raised(उठाया) the red flag.

It was the Narasimham Committee in the late 1990s that recommended(सिफारिश ) consolidation(एकत्रीकरण/समेकन) through a process of merging strong banks. The issue has been the proverbial(लौकिक ) bee in the bonnet of successive(क्रमिक/लगातार) governments since then. What the committee also recommended was shutting down the weaker banks and not merging them with the strong ones as is being done now. But this is obviously(जाहिर/शायद ) not an option politically even for a government with a brute majority( बहुमत) in Parliament. The biggest plus of the mergers is that they will create banks of scale — there are too many banks in India with sizes that are minuscule(छोटा /घटा ) by global standards with their growth constricted(जकड़ना/कसना) by their inability(असमर्थता) to expand(विस्तार करने में). Yet, this advantage of scale cannot be leveraged(लाभ ) without adequate(पर्याप्त ) reforms in governance and management of these banks. To be sure, Ms. Sitharaman did announce a few measures(उपाय) to make managements better accountable to the board. But the key reforms to be made are at the board level, including(शामिल ) in appointments(नियुक्तियों ), especially of government nominees. These are often political appointees, with little exposure(अनावरण/जोखिम) to banking. Surely, such practices need to be curbed(नियंत्रण करना ) as the definition of global banks is not just about size but also professionalism(व्यावसायिकता) in governance. The government will also have to manage the fallout(विवाद/गिरावट) of unleashing(हटा दें) four mergers simultaneously which is bound to cause(वजह/कारण) upheaval(उथल-पुथल।) in the industry. Would it have been better if these mergers had been done one by one? The future will colour the past.

Important Vocabulary

1. Ability(क्षमता
Synonyms: capability, capacity, competence, intelligence, qualification
Antonyms: ignorance, impotence, inability, incapability, incapacity

2. Adequate(पर्याप्त
Synonyms: acceptable, capable, competent, decent, fair
Antonyms: inadequate, inappropriate, incapable, incompetent, inept

3.Consolidation(एकत्रीकरण
Synonyms: merger, strengthening, unification, alliance, amalgamation
Antonyms: division, separation, antagonism, disassociation, disunion

4. Constricted(जकड़ना/कसना)
Synonyms:, circumscribe, compress, cramp, astringe, choke
Antonyms: enlarge, expand, free, give, increase

5. Curbed(नियंत्रण करना
Synonyms: constrain, contain, control, hamper, hinder
Antonyms: advance, aid, allow, assist, encourage

6. Disrupt(बाधित
Synonyms: disturb, rattle, agitate, bollix, confuse
Antonyms: appease, soothe, calm, clear up, compose

7. Fallout(विवाद/गिरावट)
Synonyms: radioactive dust, radioactive waste

8. Leverage(लाभ उठाएं/उत्तोलन)
Synonyms: advantage, bargaining chip, clout, weight, ascendancy
Antonyms: weakness

9. Magnitude(परिमाण /मात्रा),
Synonyms: consequence, degree, significance, weight, eminence
Antonyms: insignificance, triviality, unimportance, littleness, smallness

10. Obviously(जाहिर/शायद )
Synonyms: apparently, certainly, clearly, definitely, evidently
Antonyms: doubtfully, dubiously, equivocally, indefinitely, questionably

11. Realize(एहसास )
Synonyms: comprehend, get, grasp, know, recognize , mistake
Antonyms: disbelieve, forget misinterpret, miss, mistake

12. Recommended(सिफारिश )
Synonyms: approved, endorsed, favored, praised, selected
Antonyms: disapproved, discredited

13. Sheer(विशाल/परिपूर्ण
Synonyms: erect, precipitate, arduous, headlong, perpendicular
Antonyms: heavy, impermeable, indefinite, moderate, slow

14. Synergies(सहक्रियाओं/सहयोग )
Synonyms: teamwork, alliance, co action, harmony, symbiosis
Antonyms: discord, divorce, separation

15. sensitive(संवेदनशील )
Synonyms: conscious, delicate, emotional, hypersensitive, keen
Antonyms: calm, ignorant, imprecise, insensitive, laid-back

16. Successive(क्रमिक/लगातार
Synonyms: consecutive, ensuing, subsequent, succeeding, alternating

17. Upheaval(उथल-पुथल।
Synonyms: cataclysm, catastrophe, disaster, disorder, disruption
Antonyms: blessing, calm, good fortune, good luck, happiness.

 


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