Technology underlay FM Nirmala Sitharaman's bank mergers decision

The go-to bank for large enterprises would still be SBI
Union Finance Minister Nirmala Sitharaman, while announcing mergers of public-sector banks on Friday, said it was technology that decided which bank would marry whom.

Why she said so is clear from the composition of the staff of banks, which has drastically changed. Technology matters to the customers, the human aspect matters to mostly the staff behind the counter. 

In 2017-18, the number of officers in the 20 public-sector banks (including IDBI Bank, now owned by Life Insurance Corporation) exceeded that of the clerical and other staff. The number of employees in these banks stood at 581,349 in that financial year. 

This is an amazing development, as the data from the RBI shows. The data does not include State Bank of India (SBI) because it forms a separate category but the trend there too is the same. Its employee strength is 264,041. As late as in 2007-08, the number of officers in the other public-sector banks was half that of the clerical and other staff.

The switch in the composition of bank employees has happened because in the past 10 years all state-run banks have reduced the number of lower-level employees because automated operations could fill in for them. So deposit-related functions, which account for the bulk of office work in a branch, have been scaled down substantially because customers have moved to net banking, while there has been an accretion in the number of officers to bump up the activities of credit departments. 

The numbers show in the 10 years since 2008, the 20 public-sector banks have added no clerical staff while their officer strength has risen by a cumulative growth rate of 5.19 per cent. 

So for the Department of Financial Services, the prospect of the huge unionised staff opposing any move to change their working conditions was not a major concern. The numbers are not significant any more. As the minister said in the press conference and Finance Secretary Rajiv Kumar told Business Standard on Sunday, the choice of merger partners was based principally on technology. The department is clear that after the mergers, these banks will operate more in the retail sector and serve small to medium enterprises. The go-to bank for large enterprises would still be SBI. 

In the past decade, the department had often asked human resource consulting firms to suggest the best merger combinations. That picture has changed. It was technology that decided the best fit. 

As late as 2016, Vinod Rai, former chief of the Banks Board Bureau and former secretary to the department, had said the best fit would “not be purely on merit” and would include issues of synergy of staff. It was an impediment that has practically vanished.

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