After the Union government announced its decision in August 2019, these PSBs (public sector banks) were doing the ground work for the actual integration of the six merging banks (MBs) with four anchor banks (ABs). In previous part, we delved on issues like differences in the internal systems and procedures followed by MBs and ABs and the information technology (IT) related mess that the merged banks are now facing due to inadequate understanding of the differences. In this part, we will look at issues related with human resources (HR), decision-making process, cultural conflict and the total impact the bank mergers are having on customers.
HR Related Issues
Finance minister (FM) Nirmala Sitharaman had announced that the staff of the MBs and ABs would get the best of HR systems prevailing among the affected entities. The compensation packages are uniform among the ABs and MBs but their perquisites, like reimbursement of expenses on conveyance, entertainment, development and house rent, differ from bank to bank.
Similarly, each bank has its own transfer policy arrived at after mutually agreed settlements within the ambit of the service rules. After April 2020, the systems prevalent in the ABs are required to be uniformly followed by the staff of the MBs.
For instance, some MBs would transfer their officers only after the end of the financial year and give them one month’s time to get relieved and report at the new place of work. Transfers would not be effected before completion of a reasonable tenure of generally three years.
In conformity with government guidelines, working couples would get posting to the same station or one spouse would be posted closer to the place where the other spouse works. In the post-merger scheme of things, these rules are given a go-by.
In case of reimbursement of expenses, those of ABs are required to be followed uniformly causing understandable heartburn among the employees who had better settlements.
In certain banks, a standardised system of quarterly bipartite meetings at the corporate level between the representatives of the recognised unions and the senior management team was in place. It would address a host of bank-level issues relating to the staff, the bank’s business plans and strategies.
The CEO (chief executive officer) would share his expectations and concerns. Similarly, union leaders could put forth views on the reforms needed, among others, in the areas of systems, training, staff motivation and work simplification. At the zonal level, too, similar interfaces would take place.
To redress individual grievances, there would be a formal grievance redress committee with equal representations to union functionaries and the management functionaries at the middle level. Such systems strengthened the trust between the top union leaders and management team; that trust would get percolated down the line.
Under the new dispensation, there are neither formal periodic meetings nor informal exchange of ideas and concerns. There is also no formal grievance redress machinery. HR management cannot be one-way-traffic; but, after mergers, the bipartite machinery has become very tenuous.
A serious fallout of the merger is loss of a good number of employees and officers who either exercised the exit option offered after formal merger last year or took to voluntary retirement mode.
It is learnt that in one MB, 250 officers and, in another, 195 officers opted for the exit route under the government scheme. There were top and middle level executives among those who opted out. The resultant vacuum is difficult to fill. No effort was made to find out the reasons for their extreme decision in the year of a devastating pandemic when a secure job was an insurance against severe financial distress.
It speaks eloquently about the HR approach of ABs.
Efficiency of a PSB improves when decision-making is decentralised and properly delegated with adequate checks and controls. Some of the MBs did have decentralised decision-making systems. Decisions on small loans to personal borrowers have to be quick and with least paper work in the present age.
As illustrated earlier, some of the MBs had evolved a framework for quick loan decisions. Even the head of a small rural branch had the delegated power to accept, process, sanction and disburse loans up to certain ceilings. Paper pushing was minimised so long as the sanctions were as per the laid down system.
After the mergers, such systems prevalent in MBs have been replaced by a system of layering-requiring coordination and follow up among multiple points, causing avoidable delay in decision-making.
Take another example of wrongly crediting interest earned by a deposit into a different head of account or to another customer’s account. Once the error was located, the branch head could rectify the error and report it to the controller. After the merger, even on such mistakes, he cannot take a decision until a formal approval is received from his controller.
The merger candidates had only one common factor: they were all government-owned. Beyond that, each bank had its own organisational culture, process, geographical and societal link.
For instance, the three Karnataka-based banks, Vijaya Bank, Corporation Bank and Syndicate Bank had emerged primarily from a vast rural background with emphasis on one-to-one relationship between the clients and the staff.
Commonality of language promoted a spirit of belonging to one family for long years even after government takeover and the IT revolution. The customers could find themselves on the same wavelength as the staff making it easier for them to discuss freely with staff at all levels.
After the mergers, conscious efforts are being made to steam-roll a common language overlooking the earlier environment. ATMs, branch premises, notice boards and name plates carried descriptions in the local language before merger. After April 2020, it is near total Hindi and English everywhere.
While merger helped in building size, the advantage of number was not utilised to bring in staff familiar with the language, culture and customs of the location where the branches are operating. How can an only Hindi-speaking manager deal with an entirely Kannada-speaking clientele at a remote town of Karnataka?
How will an only Kannada-knowing borrower understand a document printed in Hindi or English? How will an ardent fan of local language embrace a banker who invites him in Hindi and English? At least in Karnataka, the discontent is simmering among Kannada activists that PSBs are colonies of Hindi-speaking regime.
Within the MBs too, they had long traditions of person-centric inter-relationship structures. People would address each other by name ignoring the hierarchy.
The new dispensation makes the relationship more formalised and hierarchical, which is contrary to a long persisting organisational climate in many MBs. This will have a far-reaching impact on the institutional culture of PSBs in the days to come.
Impact on Customer Service
All these glitches have had their toll on the customer service after mergers.
In major areas of customer dealings, there have been too many complaints. Non-functioning ATMs, unfamiliar internet banking modules, dysfunctional mobile banking apps, unhelpful staff who themselves are unfamiliar with the systems imposed on them, an entirely red-tapist grievance machinery have all added to the discomfiture of long-standing customers of MBs.
I learn that many customers found it difficult to continue their banking relationship with the new entities and have already shifted to other banks.
These were further aggravated by sudden revision of service charges of different descriptions without adequate notice. When higher amounts were deducted for returns of cheques or for not maintaining minimum balance, there was no advance intimation or effort to put across the reasons.
The mode of collection of rent on safe deposit lockers was changed from the anniversary date of opening to the beginning of the financial year without notice.
The system of oral representation is replaced by formal communication like email, letter, or formal helpline (which often would go unanswered). Letters do not get immediate response; reminders are needed to trigger corrective actions.
A Missed Focus
There was an elementary failure to appreciate that merger is not just the merger of balance sheets and replacement of the names. There were serious failures at three levels:
a. Preparing the ground work
b. Identifying the differences in systems and IT packages and evolving strategies to harmonise them
c. Taking the stakeholders on board.
These failures have left the new entities with raw wounds at all levels. With persisting failure to first address these wounds, a plan to revitalise the ailing PSBs will remain a pipe dream. In the meantime, they will continue to bleed. The government’s plan of privatising them would not make them healthier and more efficient.
The names and assets can be sold, but the buyers will be compelled to restate their priorities in turning around the ailing PSBs.
This is concluding part of a two-part series.
Read the first part here…
(TR Bhat is former president of All India Bank Officers' Confederation (AIBOC) and former officer of Corporation Bank)