Sethurathnam Ravi (S Ravi) is the former BSE Limited Chairman and Founder and Managing Partner of Chartered Accountants’ firm Ravi Rajan & Co., an advisory and accountancy firm, headquartered in New Delhi, India. In his tenure spanning more than three decades, S Ravi has gained extensive experience in the field of banking and finance, financial and management consulting; including mergers and acquisitions, valuations, rehabilitation & restructuring of companies and turnaround strategies, auditing of companies and banks among others. He spoke to The Pioneer’s Kushan Mitra on the recent decision by the Finance Ministry to merge several Public Sector Banks.

What according to you is the biggest challenge of the banking mergers announced by the Finance Ministry?

There are some challenges that come across, the biggest of course is the emotional uncertainty that will play on the minds of the bankers themselves. When you have spent an entire career in one place it can be very unsettling to leave.  The second thing is uncertainty on the career front, because someone will suddenly be dropped into a new ecosystem especially for those coming from the smaller bank. That is a very big challenge, there will be a lot of learning and reevaluation that will need to take place.

What about the customer, they also get emotionally attached to a bank?

The customer will have to look at it is a very different way and that will need to be articulated by the new banks. See what has happened to the PMC Bank and smaller banks are feeling the pressure. The choice for the customer is stark, would they want to stay with an identity or move to a newer bank where their money is safe? So I believe customers will move to safer banks.

So you believe that customers after having seen what happened to PMC bank will be happier to accept the merger?

I think customers have seen that the government has pumped in a lot of money into the banks and they will see that the government is supporting these banks. From a customer viewpoint you feel safer and even as borrowers, the smaller, weaker banks were not extending credit and now that situation should change. At the same time, the powers will be realigned. Hypothetically, a General Manager in Allahabad Bank had authority over just Rs 50 crore, now as part of Indian Bank, he or she can manage Rs 200 crore. The decision making will become a lot faster and that should help the small to medium segment of businesses.

And with the reassurance of no job losses things will also be smooth?

A branch consists of 8-12 people and those jobs are going nowhere because the brick and mortar will remain the same, some banks might have branches next to each other so some realignment might happen, but people will not lose jobs. Also, the skillsets of bankers are changing, there will be a lot of demand for the younger people who are more aware of aspects like digital banking. Also, you have to remember that other than HDFC bank, most private sector banks in India have had their own challenges, so you must not think that it is only the PSU banks in trouble.

What about the subsidiaries of many of these banks?

Like Can Fin Homes of Canara Bank?

Almost all these subsidiaries are either joint-ventures or already partially divested. Keep in mind when these were set up a decade ago, the investments were made at par. Now the banks will get a good premium for them. And many of the subsidiaries were in non-banking areas like insurance, pensions, these are not your core business. In housing finance, the banks themselves were capable, so why were they set up? To access a new talent pool and new investments. It is a competitive market in sectors like housing finance, and if teh banks can unlock good value by divesting the firms, they should.

So do you also believe that bank employees have realised that a larger bank is also better for them in the long run?

See this is the single most important aspect, the emotional aspect. The bank employees have to be taken care of, how do hold their hands through the entire process. I would set up taskforces for all these major challenges. There is another huge challenge as well, in the IT space, just to collect and sanitise data. The margin money is different for different types of borrowers in different banks, now collecting that data is important and should have a dedicated taskforce behind it and then finally take a decision.