As we enter April, 10 public sector banks will be merging today making it one of the biggest consolidation in banking history. In 2019, the government had announced that there will 4 bigger banks by consolidating 10 banks which brings the public sector bank count to 12 from 27. Here are the ‘Mega-Merger’ details:
- Oriental Bank of Commerce (OBC) and the United Bank of India will join Punjab National Bank (PNB) making it the second-largest bank after State Bank of India (SBI).
- Union Bank of India will be merging with Andhra Bank and Corporation Bank
- Allahabad Bank and Indian Bank will come together
- Syndicate Bank will merge with Canara Bank
Tech integration: Prime focus for this wave of merger
While the first wave of banks involved a geographically based integration, the second wave is focusing more on the tech integration based consolidation. During the Mega-Merger announcement in August 2019, Finance Minister Nirmala Sitharaman had emphasized on making the banks stronger and placing trust in ‘next gen’ technology features. She said that this would ensure that there is no disruption for customers due to the integration of fintech operations in these banks.
This list of this merger was drafted once the banks were selected based on one bank having a larger capacity, second having the technology-driven capacity and ascertaining the deposit franchise of the third.
Canara Bank and Syndicate Banks came together since they worked on iFlex core banking system and similarly, Allahabad Bank and Indian Bank merged as they used BaNCS.
For the other mergers, Finnacle CBS Platform was used to make two sets of 3 banks merging into one for better management.
Learnings from first wave merger
The first wave of mergers among Bank of Baroda, Dena Bank, and Vijaya Bank gave a healthy insight into what were the major challenges faced during the merger. Integrating technology was one of the biggest since there was a serious mismatch in their operating system.
Not just operating systems, some analysts pointed out that banks would take at least 2-3 years to stabilise technologically. The integration would involve the website, application, IVR, data and analytics from all banks, and doing all this while ensuring cybersecurity.
While most banks will have the same software, backend integration is where most tech companies would have to help out.
Summing up: Technology is of utmost importance to banking operations
- More Efficiency: There is an evident increase in efficiency once technology is involved which means the customer is served better.
- Sorting Information: The bank will have a stronger hold on internal operations since all systems will be updated with information making it easy to sort information.
- Cost-saving: There will be a major cost reduction since manual work will become automated and also floor space will be reduced.
- Accurate: Cheque clearances, passbook entries, branch reconciliations and other functions will be faster and correct.
- Internet: The internet also helps banks carry put other functions such as customer service and internal communication effectively.