What is the issue?
- SBI recently merged its five associate banks and Bharatiya Mahila Bank (BMB) with itself.
- The release of first quarterly performance of the merged entity calls for a rethink on the government's consolidation strategy.
What is the impact?
- The consolidation has weakened the original standalone entity of the SBI in terms of NPAs.
- The merger took a heavy toll on the bank’s recovery.
- The deterioration in asset quality was essentially because of the merger.
- SBI's lending growth has slowed down.
Is consolidation the right choice?
- In SBI’s case the conflicts and disparities of work culture might have been fewer.
- But in case of an increased geographical reach for a merged entity in future, bridging the work culture gap at operational level would be challenging.
- The problems faced by Indian public sector banks run deeper, and mergers cannot provide a quick fix.
- The solution requires better recapitalisation as well as governance reforms so that the banks' shortcomings are sorted out.
Source: Business Standard
