RBI's deputy governor Mundra sees no job losses from bank consolidation

Bank consolidation should wait for the ongoing balance sheet clean-up so that the merged entity can get a fair valuation, Reserve Bank Deputy Governor S S Mundra said on Friday and allayed fears of job losses in case State Bank of India (SBI) merges its five associate banks with itself.

"All these fears about job losses are without any base. Whenever such situation arises, there are doubts and fears. But slowly, as the dialogue goes on, there will be clarity on it," he told reporters on Friday evening.

The comments came on a day when the unions at the five associate banks of SBI went on a nationwide strike protesting against the merger with their parent bank. They have also called for nationwide strikes on June 7 and July 20.

Mundra, who joined the Reserve Bank of India (RBI) after rising up the ranks in commercial banks, said there have not been any job losses in such situations, even in the private sector.

He, however, said it would be good for the larger process of bank mergers to happen after the ongoing balance sheet clean-up.

"Consolidation has to be an activity which should be well calibrated. Right now, one important activity is on, which is the cleaning up of the balance sheets. "Why I say clean-up before consolidation is important is because that is the only way you can arrive at a fair valuation," he said.

Mundra, however, added that the five associate banks of the country's largest lender are already integrated in a "major way".

When asked if the weak banks should be merged first, he quipped that at present there is no dearth of weak banks, but consolidation should be carried for the "right reasons and with the right bank so that there is a synergy." "I don't say consolidation has no room. Consolidation will have its own merit with the growth in the economy and whatever global (requirement) is there. What is important is right sequencing, right intention and right process. If all the things are there, the outcome will certainly be right," he said.

In a surprise move earlier this week, SBI said it was ready to merge all its five associate banks with itself and also take over the newly-created Bharatiya Mahila Bank, a move that will make it a Rs 37-lakh crore behemoth with over 50 crore customers and amongst the top 50 lenders globally.