BANK MERGERS: EMPLOYEES SHOULD SEE REASON: SIZE MATTERS

The strike by employees of state owned banks against mergers is unwarranted and uncalled for. Mergers actually results in overall benefits to all stakeholders when the consolidated post-merger entity is more valuable than the simple sum of the two separate pre-merger units. The primary cause of this gain in value is in the performance improvement following the merger. The post-merger focuses on improvements in all types of efficiency, led by the increased cost efficiency. The mergers have been motivated by a belief that a significant quantity of redundant operating costs could be eliminated through the consolidation of activities. Substantial geographic overlap reduces the number of branches in markets. A related effect of mergers is increase in market share in the very very competitive market. More over public sector banks are not being merged with private sector banks. The government has assured to the employees that there will be no change in the service conditions, emoluments, terminal benefits etc. The ownership still remains with the government. The move is to create banks of international size, to play a significant role in the world economy in the changed economic scenario.