Customer to IT integration, banks to follow BoB's footsteps during merger

Topics PSB | Bank mergers | PSB mergers

Illustration: Ajay Mohanty
Customers of six public sector banks (PSBs) may have to migrate to insurance products offered by four anchor banks, which will acquire them during the amalgamation. 

The Insurance Regulatory and Development Authority of India (Irdai) does not allow banks to have more than three tie-ups in life, health, and general insurance separately. Finance Minister Nirmala Sitharaman on August 30 announced the merger of six PSBs into four.

Punjab National Bank (PNB) will take over Oriental Bank of Commerce and United Bank of India; Canara Bank will subsume Syndicate Bank; Union Bank of India will take Andhra Bank and Corporation Bank and, Allahabad Bank will become a part of Indian Bank effective April 1, 2020.

During the merger of Bank of Baroda (BoB), Dena Bank, and Vijaya Bank, which came into effect from April 1, customers holding insurance policies of the latter two banks were asked to switch to insurance products offered by BoB, the anchor bank. Customers with life insurance products were given six months to switch over to life insurance offered by BoB, while for non-life and general insurance, customers were required to choose BoB products from April 1.


However, lenders may seek exemption from the Irdai for holding stakes in multiple insurance sector joint ventures, a senior PSB executive said. Though banks are allowed partnership with multiple insurance companies for offering products to customers, but they are allowed to hold a stake in only one insurance firm, according to the present law.

Customer integration

The account number of customers will continue to remain the same, while they will be allowed to retain their debit cards and cheque books for some time, post-April 1, 2020, till a complete amalgamation. 

The road map
  • Banks to take cue from merger of BoB, Vijaya Bank, and Dena Bank
  • Banks to form steering committee led by MDs and EDs for overall guidance
  • Integration management teams to be set up led by general managers 
  • External advisors will be hired for integration of IT and HR
  • MDs of all banks to hold meetings in each other’s headquarters
  • Orientation programme to be held for senior management
  • Bank management to conduct town hall meetings
Banks will approach the Reserve Bank of India (RBI) seeking special dispensation on retaining the Indian Financial System Code, a unique bank branch number used during electronic payment transactions, and Magnetic Ink Character Recognition Technology (MICR) — printed on cheque books for faster processing. “It is expected that within six months to a year of merger, the RBI will assign a common code for IFSC and MICR for amalgamated banks. Once that happens, customers may be required to replace their cheque books,” an executive director of a PSB, part of the amalgamation process, said.

Cash deposits and withdrawals of less than Rs 50,000, inter-branch transfer of up to Rs 100,000, balance inquiry, among other services, will be made interoperable among the amalgamated banks. There will not be any change in the terms and conditions of existing loan facilities, the executive said. The mobile applications of all banks will be functional for some time after the merger takes place. 

To ensure a win-win situation for customers, the service charges, or minimum monthly balance requirement for the banks to be merged, will be fixed in a way that the lowest of the charges or criteria amongst the three (or two) banks are taken into account.

IT integration

The executive explained that even as the merger of balance sheets will take place immediately on April 1, 2020, the complete consolidation, in terms of a common database for all the banks, may take some time.


For instance, in case of the BoB merger, though all three banks were on the same IT platform (Finacle), the versions of software used by them were different as BoB was using an advanced version. “There was a huge difference in the core banking system software being used by these banks even though all of them were on Finacle. Infosys is working on a solution for complete integration of IT platforms, which will help other banks, too, during their merger process. This might take almost one year,” another PSB executive said.

HR integration

The promotions of bank executives will take place proportionately without giving any undue advantage to the anchor banks, an official said. “The promotions from CGM to GM level will happen proportionately as happened during the BoB amalgamation,” the official said. As a matter of policy, banks will not retrench any employee and in case of branch consolidation, employees will be moved to other departments or branches.

“Banks will go slow on consolidation of bank branches. Only in cases where branches of two banks are there in the same building will a consolidation take place initially. Also, it has been decided that banks will not surrender the license of the branch to be merged, which will be used to open a branch in some other area,” the official said.

During the BoB amalgamation, the bank had taken a decision to rationalise around 900 branches, an executive, involved with the merger process, said. So far, only around dozen branches have been merged. The administrative offices of banks will be rationalised. In case of BoB, employees from administrative offices were moved to outbound sales, branch operations and sales. 


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