‘Bank consolidation should happen, but subject to conditions’

Chennai, March 2:

Indian bank employees are not against the consolidation of government-owned banks provided certain conditions are met, a top union leader said Monday.

We are not against consolidation happening in the banking sector. But it should satisfy three conditions, viz., the consolidation should strengthen the banks, help people and it should not bring tears to the eyes of the employees due to loss of job, C.H. Venkatachalam, general secretary of All India Bank Employees Association (AIBEA) told IANS.

He was reacting to the government’s reform measures for the banking sector.

According to him, the three conditions presuppose that the public sector character of the government owned banks does not change.

“Curiously all bank managements want other banks to merge with them. They do not want their banks to merge with another and end up losing their positions,” he said.

According to him, there is a need for more branches to reach banking to unbanked rural populace.

Welcoming Finance Minister Arun Jaitley’s budget speech on the setting up of Bank Board Bureau – the head hunting bureau for bank heads and board members – Venkatachalam said the members of the proposed body should be apolitical.

Venkatachalam is on the same page with the government’s decision to revise the system of statement of intent or memorandum of understanding it signs with the bank management.

“The current system is like a pyramid scheme/multi-level marketing (MLM) scheme where the large number of employees do not get performance incentives while those at the top – chairman and managing directors, executive directors – get hefty incentives. This despite banks stacking up huge non-performing assets,” Venkatachalam said.

Venkatachalam, however, said there is nothing much in the union budget for the banking sector.

“There is not measure announced to recover bad loans or incentive to the people to put their savings in bank deposits. The government is shifting the focus off priority sector lending,” Venkatachalam said.

He said the government has not allocated sufficient money for bank’s capitalisation, leaving the banks to tap the equity markets.

Incidentally, global credit rating agency Moody’s Investors Service on Monday said the budget’s implications for the banks are mixed, noting – for example – that their capital allocation for fiscal 2016 is lower than fiscal 2015.

According to Moody’s, the government proposes to improve governance and set up an autonomous bank board bureau, which would help public sector banks in areas such as management quality and strategy.

The proposed introduction of a new bankruptcy law would also be credit positive. The current weak bankruptcy framework has been a major impediment for banks in enforcing credit rights. However, few details on the new law are currently available, Moody’s said. IANS