Smoothening SBI’s merger process

The merger of associate banks with the State Bank of India should be relatively simple and smooth given that the policies, systems and procedures, technology platforms of the banks are the same and to a large extent the work culture is the same too. .

Already several steps, such as synchronising interest rates and products on offer are initiated for a smooth transition. That said, as the D-day for the merger approaches, two important stake holders — customers and staff unions — have expressed some genuine fears and concerns.

And these concerns are to be addressed for fully deriving the benefits of the merger and achieve the objectives of creating a strong and large world-class bank.

In the absence of any assurances or pronouncements, many customers of the associate banks are wondering what is in store for them. The unions have their members’ interests as the primary concern.

The customers who are worried about the uncertainties might migrate to other banks, preferably the ones in the private sector. Given the shrinking avenues for growth, these banks might be happy to welcome depositors and good borrowers with open arms.

There are some points in favour of the strong and healthy State Bank Group; these include safety and security, and huge resources to meet the credit needs of large borrowers, backed by a worldwide network.

Granted, depositors get marginally better interest rates, their safety being ensured by an unwritten assurance that the RBI and the Government would not allow a bank failure. But this aspect can’t be overplayed because customers' concerns about accessibility of staff and personalised service is a fact too. The advantages of having head offices nearby and enjoying easy access to top executives may not be there after the merger.

Mid-sized companies and SMEs feel more comfortable in dealing with regional banks, which are more amenable and accommodative.

Customer relations may not be the same with a monolith, especially after rationalisation of branches and relocation of the surplus staff.

This exercise, therefore, should proceed slowly and over a period of 12-18 months. This aspect should also be emphasised to the operating staff.

At the SBI, the corporate accounts group (CAG) takes care of the special needs of large corporates, facilitating quick decision making. It has a few shortcomings. While it seeks to cut across hierarchy and provide direct access to decision making, the large number of customers and the sheer volume of business render its objectives difficult to achieve.

The market dynamics are such that minor modifications and changes are warranted in the day to day operations of corporates. In reality, the CAG branches are not equipped to take decisions or get quick decisions from the corporate office.

Despite being vested with adequate powers, delays occur either because the staff are reluctant to take decisions for fear of accountability or want to stick to the rule book for lack of understanding of the market environment. For even marginal changes in the terms or credit limits they have to look to the corporate office.

The customers may feel frustrated as they don’t get easy access to the top executives at decision making level as the executives have to deal with a large number of customers across the length and breadth of the country. The customers also find it difficult to frequently travel to Mumbai to present their case with no guarantee of an appointment at short notice.

This problem may get exasperated with addition of more accounts from the merged banks, though it is possible several customers might already be dealing with the SBI, either as a member of a consortium or syndication. In the changed scenario it is inevitable to have a relook at the entire gamut of CAG setup.

The delegation of powers has to be reviewed and even decision making to that extent decentralised. To assure the newly joining customers it may be worthwhile to have a sprinkling of senior executives from the associate banks in the post merger credit administration set up. This argument ipso facto holds good in case of MSMEs also.

One of the major concerns of the staff of associate banks is the rationalisation of branches resulting in redeployment and relocation. The HRD has an important role to play and allay the fears and inculcate a sense of belonging and security.

The problem may be acute in case of metros and urban centers where the branches of the Group are fully staffed. Recruitment will suffer and those few who join have to necessarily be given assignments in smaller places to accommodate the existing seniors, which might lead to some of them opting out of SBI.

The process of redeployment should be done in consultation with the unions and in a calibrated fashion to reduce the pain.

The other serious apprehension of staff is loss of seniority and promotional opportunities in the new set up. This will have a telling impact on the motivation levels and more visible in the executives.

At the time of merger of the State Bank of Indore and the State Bank of Saurashtra the executives of same length of service were placed three years below those from the SBI. This resulted in several senior executives from the associate banks on the threshold elevation losing the chance permanently.

The merger may have marginal impact on the chances of the SBI cadres as the additions to their ranks also bring in additional number of vacancies.

But the number of zonal/regional offices and the actual numbers in the local head offices or corporate office might go up to some extent.

The size does make a difference in the exposure and experience of executives. But an important aspect in favour of the associate banks is that many of their senior executives get an exposure and gain expertise in fields such as manpower planning, recruitment, training and placement, corporate credit, NPAs management, balance sheet management including taxation, finance and accounts, treasury operations, risk management, audit function and regulatory compliances, which is available to only those who work in these departments at the corporate office of the SBI in Mumbai.

Keeping these aspects in mind, the senior executives of associated banks need to be given due weightage and not put way behind those from SBI mechanically.

The time is ripe for suitable signals from the SBI and the Government to both the customers and the personnel of the ABs for ensuing smooth merger process and realizing the synergies envisaged.

The writer is a former managing director of State Bank of Mysore