The government had in August last year announced plans to merge 10 public sector banks
(PSBs) into four. The move included Allahabad Bank's merger with Indian Bank, creating the seventh-largest public sector bank (PSB) with Rs 8.08 trillion on its books.
Earlier, Indian Bank
MD and CEO, Padmaja Chunduru told Business Standard that while products are similar in almost all the public sector banks
some tweaking is required. IT integration is a big challenge, but the Bank is well-prepared for that. The bank hired a retired DMD of SBI, who handled the merger of the SBI subsidiaries with SBI. She added that it will take 9-12 months and will have lots of cost-saving synergy.
"Allahabad Bank has a few licenses like the general ledger from Oracle and a better system than Indian Bank. Therefore Indian Bank has decided to adopt the Allahabad Bank system. Additional licenses are much cheaper than going in for a new RFP. A lot of hardware, such as servers, are available at the Indian Bank. These can easily accommodate the data of Allahabad Bank," Chunduru added.
On a question over when the merger will start paying dividends, Chunduru said, "in terms of business, profits, and others, from 2022." She added that for a 10-12 per cent growth rate, the merged entity don't require any capital, but to grow faster, they have headroom in both tiers I and II.
"We expect (post merger) to touch Rs 10 trillion by 2022, which may require around Rs 2,000 crore capital," she said.
Chunduru said, a larger balance sheet automatically enables the Bank to give bigger loans to bigger customers. While the amount that the Indian Bank can lend at present has been restricted to Rs 3,000 crore per customer, the combined entity can disburse loans of up to Rs 5,000-6,000 crore. This will bring in the bigger customers and the Bank will be able to have to negotiate power in terms of pricing. "We will also be able to syndicate the loans. Luckily, both the banks have not used the full exposure limits in all the big corporates," she said.