What are the benefits of bank merger?

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What are the benefits of bank merger? Experts believe that competition in the banking sector is constantly increasing in the coming time. In such a situation, it will not be easy for small banks to stay in the market. One advantage of bank mergers is the reduction in management expenses. This will reduce the number of people associated with the management at the above level, including the directors of banks. After the bank merger the number of surplus employees in the proposed bank can be reduced. Each other's resources can be used. Shared income from assets will help in reducing the losses of banks. Experts believe that if a bank is continuously in deficit then it must merger with another bank. If steps are not taken, then in the long-term it can prove to be dangerous for the country's economy.


Benefits of Merging Banks

For Banks:

  • Big banks can adopt innovative standards and provide innovative products and services at acceptable levels of efficiency.
  • Some government banks are active only in a certain area of the country, By merging them, they can extend their reach to other areas,
  • once grown, government banks may be able to offer more products and services.
  • May improve business standards.
  • There is also a lot of negative competition among public sector banks This will end with the merger.
  • Being a big bank, bank of India will get more recognition and rating in the world market.
  • The amount of transaction between different banks will be reduced, which will save time in clearing and accounting.
  • The merger will reduce unnecessary interference of board members in day-to-day operations of banks.
  • After the merger, the bargaining power of the bank employees will increase.
  • Bank employees can get better salary and service conditions in future.
  • The benefits and conditions of service for the workers in different bank vary. This inequality will be overcome by merging.
For Economy:
  • Reduction in technical inefficiency.
  • Reduction in business operating costs.
  • The merger will strengthen the entire Indian banking system along with the system of public sector banks in the country.
  • With the merger, banks can easily manage their short-term and long-term liquidity problems.
  • The savings of the big bank formed due to the merger will increase and its profit will also increase.
  • Due to the merger many posts of CMD, ED, GM and zonal manager will be eliminated and this will save crores of rupees.
  • Many types of products will be available to customers from the same bank at a low price.
  • The merger will also benefit risk management.

For the government:
  • This will help in meeting the stringent norms of BASEL III, especially the capital adequacy ratio.
  • The burden of giving capital to public sector banks will be lighter.
  • If the banks are less then the government will be able to control and monitor them. There will be problem in accommodating the top people of banks and their associations.
  • Due to the merger, many branches and ATMs and controlling offices will either have to be closed or transferred.
  • Due to the merger many workers will take voluntary retirement and the new reinstatement will either be stopped or curtailed. As a result, many jobs can be lost, due to which there will be a problem of law and order, it can also have side effects on the society. Every bank has its own culture. Merger may cause conflict in these cultures.
  • If a big bank is in loss then the banking industry may get an equally big shock.

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