Sub: Opinion on merging of PSU Banks

I would like to take this opportunity to first congratulate you on becoming the Finance Minister
(FM) of India, which is not only a mere post but a reward to your honesty, dedication and hard
working.

As an Indian citizen I sincerely believe that your honesty, dedication and hard work will bring
the desired strength to our economy. I also believe that you will concern about improving the
current situation of the Indian Banking system which is reeling under the pressure of different
internal and external headwinds. I am optimistic that your presence as an FM will prove
beneficial to the banking industry in the long run.

I am a Chartered Accountant engaged in financial adviser services. I am writing to express my

personnel opinions on the merging of several PSU Banks.

In my personal views, the Government shall not to initiate the merger of various Indian PSU
Banks into one. Instead, the Government should individually hold them accountable for their
performances or sell them in the market as well as liquidate their non-business assets (fixed
assets) to strengthen other PSU Banks.

As a result, more number of banks will have positive impact on overall growth of business /
industry along with a fair market for competition. This will also lead to better absorption
capacity of any financial risk / crisis as it will be shared among more of them. Hence in any
financial crisis situation, country’s industry / business growth will not have any adverse impact. I
think this is one of the key reasons why the Indian economy majorly remained untouched despite
the global financial crisis of 2008 crippling all the other major economies.

I personally believe that owing to the merging of one or two fundamentally weak PSU banks
with a fundamentally strong one, would not strengthen the overall Indian Banking system, rather
it is likely to make it a weaker one from the inside.

The current concern for Indian PSU banks is nor pertaining to its size but rather revolves around
its poor management around certain important areas like credit risk analysis, lack of transparency
in risk assessment, individualistic approach while giving loan, power centric approach, lack of
professionalism / management of credit data and many more such aspects.

Functioning of any Indian PSU Bank is depends on the top management’s approaches (which
keep changing based on change in management) and does not necessarily operate as an
independent organizational and institutional structure based on a certain vision.

I sincerely request your good office to kindly analyses the pattern of banking growth (in terms of
profitability, credit, industry-wise credit, credit growth, private sector vis-à-vis PSU credit, other
key driver of banks growth) link to management period and analysis the behavior of data, while
management get changed. The management too needs a thorough evaluation and overhaul, which
in turn can eradicate a number of problems.
I also request your office to appreciate that Indian Banks/Indian customers/Indian businesspeople
and houses especially the medium and small sized entities, unlike in developed countries, are
starved of customer knowledge, banking systems and procedure, and timely payments of
purchases / service, recovery system. In some cases, companies are not getting their dues paid
even from government companies on time.

In my opinion, the recent merger of the three Banks will yield stressful results for the consumers.
As far as banks’ employees are concerned, they will be burdened by additional data sharing
leaving them with little time for timely service to customers. Furthermore, this merger will
benefit only technology companies providing system solution in name of integration of the
current banking system, lawyer, professionals, chartered accounts and many more such agencies.
The total expenses of merging activity will be ultimately borne by its customers.

Therefore, instead of merging the PSU banks, I strongly believe that the Government should
either sell the stressed banks to private players with clear objective of banking business (i.e.
support the growth of Indian business), or make their management and operation guidelines more
accountable and performance driven with more transparency through digital technology and
online reporting. There should be management of profitability center each branch-wise including
their cost of place, which they do not include.

Other suggestion, that transfer majority of the fixed assets of the Bank’s into a separate
assets company or sells in market. This will generate cash flow to Bank and also increase
their profitability & net-worth. Same time this will make every Branches of Bank to make
profit after paying the premises rent and will support better utilization of the resources.

Below I have listed some of my questions for your kind consideration:

Opinion Point of view

Despite all the PSB’s coming  Government should have its own robust banking
under the purview of the accounting and regulatory software, either made by the
Indian Government, why is Govt. itself or outsourced under its watch. This should be
every bank spending periodically updated by the Government to meet the
individually on software regulatory requirement time to time.
separately and then having
different structure for  Every PSU Bank should be able to use this software with
reporting? license fee only for their basic accounting and regulatory
requirement. This will avoid any unnecessary investments.
 Any other modules, which Bank may require for their own
data analysis, can be of their choices under the knowledge
of the Govt.

 The same Software can be utilized to share certain data

among several banks for better monitoring of the credit
and banking risk. This data analysis will save Govt. from
any financial crisis and future planning.
Opinion
 This will create new avenues for employment as well as
 CIBIL – which is Non-government Company, can be
Why is the loan sanction and 
loan appraisal mythology
different, when the principal
is the same?
What is the rationale of 
having several branches in
digital arena?
Rating Agencies
Point of view
keep Banking management and their performances under
surveillance.
replaced with data analyst team of Govt of India.
If this is addressed properly, assets quality of every bank
will be improved considerably.
Every bank should shade off their branch network based
on their individual strength. Every branch manager will be
set-up as profit / service center. To attain the objective of
the central government, Real estate can be monetized
which will improve Bank’s capital base.
 To be made optionally and not compulsory, since Bank is
having their own Risk management and make them more
accountable and robust.
 I believe certain thinks are under carpet is better than
making everything public. This current rating agencies
fiasco has equally accountable for stressed banking
environment.
 Their public announcement making cascading effect of
poor economy and fear in business sentiments

Thank you, Ma’am, for taking time out and reading through this letter. It’s my humble request to
your office to consider this letter as a discussion and not as a complaint or otherwise. As a citizen
of India and considering yours and NDA Government’s honest and transparent leadership, I felt
obliged to share this for your kind consideration.

It would be my pleasure to meet you in person, if you feel this is a valuable opinion. I am
extremely sorry; If I have hurt you in any manner with this letter. Please pardon me.

Thanking You & Best Regards

Sanjay Bhandari