Bank mergers: How is it going to impact you?

Punjab National BankOriental Bank of Commerce,
United Bank of India
Canara BankSyndicate Bank
Union Bank of IndiaAndhra Bank,
Corporation Bank
Indian BankAllahabad Bank

After the economy posted an all-time low GDP growth of 5%, the Government announced the merger of 27 public sector banks bringing the number down to 12. As digital security is utmost critical here, banks may take 2-3 years to standardise core technology, products and customer applications before the merger can actually migrate to newer systems.

Here is how you are likely to be impacted as a consumer:
1. Get ready to change your cheque books as the various banks get merged. While the existing cheque books may remain valid for some time, ultimately they will be replaced with the cheque books of the merged entity.

2. You would have given your bank account numbers and IFSC codes for various financial transactions — auto credit of dividends via ECS, auto-credit of salary, auto-debit of various bills/charges etc. Unless these accounts are seamlessly merged into the financial system of the newly merged bank, you would be required to change the details of your bank given for these purposes. A few years back, when five associate banks of State Bank of India (SBI) were merged, IFSC codes and names of 1,300 branches were changed. The banking behemoth has changed the names and IFSC codes of branches located in major cities such as Mumbai, New Delhi, Bengaluru, Chennai, Hyderabad, Kolkata and Lucknow. Those who had auto-debits running with these banks like systematic investment plans (SIPs) in mutual funds were impacted. This could be an issue that account holders of the banks that will be merged recently.

3. Credit/debit cards issued by the merging banks may have to be exchanged for those of the merged entity although the former is likely to remain valid for the interim period to ensure no disruption in services.

4. Paperwork and keeping financial trail of fixed deposits made will increase a bit as these will be transferred into the merged bank.

5. It is not clear what will happen to the interest rates of those who have loans running with these banks as the MCLR rates are different for different banks.

6. Shareholders of the publicly listed banks will be impacted. How much the respective shareholders will be impacted will be known once the swap ratios are announced.

7. Branch network would become larger so access to bank branches should become easier. This is provided with the merged entity does not shut down all branches of merging banks. The combined entity of Punjab National Bank, Oriental Bank of Commerce, and United Bank of India will become the second-largest PSU bank in the country with the second-largest bank branch network with 11,437 branches.

8. Bank of India, Central Bank of India will continue as is. Indian Overseas Bank, UCO Bank, Bank of Maharashtra and Punjab and Sindh Bank will also continue to operate as is.