<b>Letters:</b> Bank mergers

Tackling the challenges discussed in “Banking on consolidation” (February 20) is critical to augment better operational synergy and to set a right direction for bank reforms. Past instances of merger of banks in the public sector space (except the merger of two subsidiaries of the State Bank of India) were mostly meant to rescue the stakeholders of the merged entities. The merger process should now focus more on making bank branches of the merged entity “lean and smart” than reducing numbers. In an emerging environment where banking is needed but not necessarily banks, it will be more prudent to adopt a model of a new set of branches built on connectivity using less space and infrastructure to reduce operational costs.

The Internal Working Group of the Reserve Bank of India (RBI) set up on Rationalisation of Branch Authorisation Policy has recommended broadening of the current framework of branch models to include all “places of business” — to be defined as “banking outlets”. These will be fixed-point locations, and the goal is to bring them on par with branches and capture their presence in the RBI’s database. Banking touch points in future will have to be made more convenient to customers to avail of services rather than banking on huge physical structure. The SBI has better HR policies on redeployment of people. The merged entity should work to decongest the branches diverting right talent to the newly created business verticals to infuse better operational efficiency in service delivery. Other public sector banks, under the guidance of the Banks Board Bureau, should start doing preparatory work to graduate quickly to bigger entities.

K Srinivasa Rao, Pune

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