One month of bank merger: Coronavirus lockdown proves a dampener

Illustration: Binay Sinha
A month after the country’s biggest bank amalgamation exercise, integration seems to have taken place only on paper as the nationwide lockdown to contain the spread of Covid-19 has proved a big hurdle.

On April 1, Punjab National Bank (PNB) took over Oriental Bank of Commerce (OBC) and United Bank of India (UBI) to become the country’s second-largest lender after State Bank of India (SBI) in terms of business. Canara Bank subsumed Syndicate Bank; Andhra Bank and Corporation Bank merged with Union Bank of India; and Allahabad Bank became a part of Indian Bank.

During the amalgamation, the two biggest challenges that banks face at the organisational level are the integration of technology and human resources. Both have gone for a toss, bank executives said, as Covid-19 has impacted the movement of people.

“All the banks, even after integration, are working the way they were before the merger because of the restriction on movement of people,” said PNB Managing Director and Chief Executive Officer SS Mallikarjuna Rao.

While most banks have promoted their officers, transfers haven’t taken place. There is also a lack of clarity on the role officers will play in the merged entity as banks wait for the lockdown to be lifted.

“The top management was expected to move from Kolkata (headquarter of the erstwhile Allahabad Bank) to Chennai, so that it could start working from one place. But this couldn’t happen because of the lockdown. As soon as the lockdown is lifted, we will plan to ensure transfers take place within 15 days. We have assigned responsibilities already,” Padmaja Chunduru, MD and CEO of Indian Bank, said.

Rao said the merged entity was to be restructured in such a manner that there wouldn’t be multiple controlling offices. “We don’t need so many circle offices. They have to be bifurcated geographically. We have finalised the reporting structure, but it can be implemented only by end of May, when we get clarity on the lockdown,” he added.

He said the bank had planned to complete outreach to customers and employees along with transfers between April 15 and 30.
“As a result, there is no cultural integration taking place between employees of different banks. The rapport that people build by meeting one another is missing in this amalgamation, which looks half-hearted now because of the pandemic,” a senior bank executive of an anchor bank said, requesting anonymity.

Business meetings are being held virtually, but it is not the same as working as a close-knit unit, a bank executive said.
For instance, PNB had planned that administrative offices and major branches would work with employees from all three entities to ensure integration. So a zonal office, if headed by a PNB executive, would have a second-in-command from OBC or UBI and vice-versa.

UBI’s headquarters in Kolkata was planned to be converted into a “huge” zonal office headed by a chief general manager, which was to control the 1,200 branches in West Bengal. The plan to set up a processing centre and back offices in Kolkata has also been delayed.

After amalgamation, PNB has 76 GMs and 19 CGMs. Before the merger, the Delhi-based bank had 41 GMs. The merged entities, with a business size of over Rs 10 trillion, are taking a cue from SBI, which follows this organisational structure. Union Bank of India plans to create 14 CGM posts and 55 GMs.

However, there is some confusion there, too. Both PNB and the Union Bank are following different guidelines issued by the government. For instance, PNB is following the September 2019 guidelines of the finance ministry which stated that there should be one CGM-level officer for every four GMs. But the Union Bank has chosen to follow another set of guidelines, issued in March 2015, which put a cap on the number of GM posts. The guidelines say that there should be one GM for every Rs 25,000 crore of annual turnover for state-owned banks.

“The government needs to give banks some clarity on this,” a senior bank executive said.

Some banks such as the Union Bank have postponed the release of a harmonised loan product, which was to be launched from April 1. “The bank was planning to harmonise loan products. We were planning this in a big way from Day 1. But, since there has been no vendor support since the middle of March, we had to delay it,” a senior UBI executive said. The post-amalgamation training and orientation programmes of staff have also been pushed.

“We have begun virtual training of staff. You see cultural integration is not easy for a 100-year-old bank. Till every employee feels they are a part of UBI, it won’t be complete,” the bank’s MD and CEO Rajkiran Rai G said. He added that the bank has devised a mechanism to seek feedback from employees through surveys, asking them about their experience after the merger.
The banks didn’t go on an overdrive, like in the case of the integration of Bank of Baroda with Dena Bank and Vijaya Bank from April 1, 2019. The combined entity had launched an aggressive campaign known as the ‘Power of 3’.

“We had a strategic plan, which was put in place before the lockdown. The disease has upended that. Now we are taking stock again, but it is too early to say that the strategy won’t work. We have to wait for the lockdown to be lifted and how things will be after that,” Indian Bank’s Chunduru said.

Though footfall at branches has reduced, the banks haven’t been able to put up signage informing customers about the amalgamation.

However, the banks are ensuring that customers do not face inconvenience of an amalgamation doubled with the lockdown. The Reserve Bank of India’s dispensation of one year for banks to integrate the IFSC and MICR codes (used for internet banking) has come as a relief.

A top bank executive admitted that technological integration had taken a backseat. Though the information technology firms were working from home to integrate the core banking system (CBS), it will likely to be delayed. In the normal course, it would take 12-18 months to bring the combined entity on to a common platform, a bank executive said.

“Besides the CBS integration, all activities related to vendors are held up. Be it related to the digital signatures, common IP addresses, cheque truncation system, know-your-customer (KYC) or employees’ data integration,” the executive said, requesting anonymity.

For now, all eyes are on how the government prepares for the next phase, once the lockdown ends on May 3.

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