Financial Daily from THE HINDU group of publications
Thursday, Jan 27, 2005
Public Sector Banks
Money & Banking - Mergers & Acquisitions
Government - Politics
PSBs merger plan on a sticky wicket Left parties, unions in no mood to relent
Sarbajeet K. Sen
New Delhi , Jan. 26
INDIA'S traditional troubles with the opening pair on the cricket field are spilling over to the banking arena. The Government scorekeepers for bank mergers are a worried lot with the pair selected to open the consolidation innings - Union Bank of India and Bank of India - threatening to carry their bat into the next fiscal with nothing on the scoreboard.
Feelers reaching the Finance Ministry suggest that the Government's wish to somehow kick-start the PSU bank consolidation process within the current fiscal might not be fulfilled.
Officials said that with Left parties and the bank unions coming out openly against PSU bank mergers, the announcement of the Union Bank-Bank of India merger might be postponed to sometime after the presentation of the Union Budget, and may well spill over to the next fiscal.
"We have to take into account the concerns of the unions and the views of other political parties. The announcement of the first merger might be pushed beyond the Budget," a senior official of the Finance Ministry said.
The Finance Ministry had initially thought of announcing at least two big bank mergers within the current fiscal, but had to scale down its plans on account of signs of serious political opposition building up.
The opposition came mainly from heavyweight politicians who felt that the merger process might result in the obliteration of banks that were headquartered in their own home State if the Government were allowed to go ahead with plans to merge them with larger banks from other States that were eager to gobble up these entities.
Eventually, Union Bank and Bank of India became the chosen ones for the first mergers among strong public sector banks since both banks are headquartered in Mumbai. However, despite the commonality of location the bank unions and the Left parties have expressed their opposition to the process of consolidation process itself.
Officials also said that the slowdown in the merger plans was also because of the fact that the Government currently had too many banking reforms proposals on the agenda and would not like all of it to be bunched at one go.
"We have too much on the platter at present. The banking FDI roadmap itself is a major reform agenda that we are grappling with. We have to go one by one," officials said.
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