Opportunities for MERGERS

It is heartening to note that State Bank of Saurashtra is being merged with its parent SBI and RBI has issued notification suggesting that SBS brancehes will operate as SBI branches.
Opportunities that unfold themselves in any industry ,more so in banking sector must be availed in the larger and long range interests of stake holders.Mergers and consequent consolidation fetch following benefits -
1 Mergers bring the benefits of economies of scale.In an industry like banking where earnings are based on the interest differential and spread available, volumes alone matter.Otherwise in the long uncertain run we can not say what will happen to profitability and pressure on spreads and profitability will keep on growing and intensifying.This is a challenge for all banks,particularly for the small regional players.
2.Avoidance and elimination of duplications can be done through mergers.Supervisory and monitoring infrastructure by way of head offices,regional offices,circles etc available with the bank with which other banks are being merged can be used for all banks on merger and similar offices of merged entities can be eliminated thus cutting lot of costs.Similarly sanctionimg authorities can be the same for all entities and duplications can be eliminated saving huge money..
3.On account of merger and consolidation size will grow and on merger aggregate capital , increases market capitalisation and with that advantage the consolidated entity will be able to access equity from the market as and when needed with ease.
4.Small entities can not spend heavily on new technology.Bigger banks can adopt latest technology and for them the same may be more cost effective when compared to small players.
5.Employees will be greatly benefited from mergers.Consolidated entities will have more paying capacity and they can extend better amenities and facilities.They can also provide employee stock option.
6.In today's context creating value for stake holders and enhancing value from year to year will be very crucial.Bigger ,stronger and highly performer entities can create better value for all.
7Creation of banking entities of global size and global competitive strength will be crucial for India to take full advantage of globalisation.
8.Product innovation will be very important for banks in the days to come.The forthcomong generations will need newer and newer banking products.Large and giant banks can spend heavily on product innovation and not small banks.Mergers are thus beneficial for banks,customers,staff,and all stake holders alike.
In the case of SBI group already systems are identical and organisational culture too is similar.Even if they are dissimilar the same can be easily integrated in a couple of years.Organisations are permanent.Staff come and go.Once the present staff leave the organisation on attaining superannuation the new staff will be quite different.They need opportunities,challenges,pay hike of large amounts annually.incentives stock options and so on.They may jump from one bank to another for getting larger pay. Theyounger new staff are not loyal to any bank.They are loyal to their profession.Any bank is OK for them if they get what they want.We can not keep things intact assuming that present staff are permanent in these banks and none else will come from outside with new and heightened aspirations..Any dynamic bank can not have such assumption and can not have status -qua for ever.For staff of today what is vital is to get one more option for pension.All those who were in service as on the date of last day fixed for earlier option in 1996 regardless of their subsequent retirement.resignation,VRs or death must be given one more option for pension.For this staff and unions must fight.If they add hundreds of things which are not relevant the issues of concern for bank staff viz pension option will be lost sight of at all levels.Other things will put in shade the vital concern.
Mergers are therefore inevitable for our banking prosperity tomorrow.If we give up merger opportunities today that augers well for bank's prosperity in the future years the posterity will not forgive us.We must therefore avail such opportunities for increasing prospects for growth and performance.Recently CBOP and HDFC Bank took advantage of such opportunity and SBI group or other PSU banks can not lag behind.