Customers voice concerns over merger between SBI and State Banks/SBI Associates

As govt announced SBI’s merger with State Banks, there was opposition over State Bank of Travancore merger by Kerala State. However, Govt went ahead and passed the merger. This was basically due to the fact that monetary and banking matters lies with the Centre. States can just oppose but it remains there. Opposition of Bank Unions matters more.

In another twist, now customers have voiced concerns over the merger. Why? SBI will miss the personal touch of these small state banks:

It is not as if the bank unions are alone in their fight for de-linking of associate banks from State Bank of India. A cross-section of customers of these associate banks has come forward to support the unions in their struggle.

A Ravi, Managing Partner of RSR Industries and a customer of State Bank of Bikaner and Jaipur, toldBusinessLine that a good number of MSME (micro, small and medium enterprise) customers of the bank had initiated the process of moving their account to a smaller bank.

“I have been banking with SBBJ for over 20 years. I was shocked to learn that the bank would soon be merged with SBI and am sure I cannot expect the personalised service that the staff here extend, as SBI is an ocean,” he said. V Dinesh, a customer of State Bank of Travancore, asked: “Why should we suffer for a decision made by the managements of these banks?”

Asked to explain his contention, he said “many of us have established good relationship with the personnel in each of these banks; have certain level of comfort banking here. We cannot expect the same comfort when SBT becomes one with SBI.”

M Kailash said he used to bank with SBI before moving to SBT, and this was 23 years back. “The problem was “accessibility” to senior officials.

These MSME customers fear that they would be worst hit, post the merger. “How would it matter to us if SBI emerges a global bank? In what way would customers stand to benefit?” asked Rajesh, a customer of State Bank of Patiala.

This is really fascinating stuff and actually turns the story on its head.

Most of these mergers are pushed under the assumption that these small state banks have lost their vigour and do not serve the customers. Merging with SBI will bring back the mojo and the efficiency. They will also become part of a larger SBI and be more stable going ahead.

But here, we see customers not really agreeing to this mainstream thinking. They think smaller banks served their purposes given its personal touch. One could reach out to senior management withe ease in case of any problems. This is in essence the logic of having smaller banks at the first place. The interpersonal skills can’t be matched. It is ironic that the same big banks advertise about having personal touch which is essentially a small bank feature. The small banks look at all these personal aspects than mere growth which becomes the essence of large banks.

As this blog argued previously, Indian banking policy is totally confusing. On one hand we want new smaller banks, on the other we are closing/merging all these old small banks which have a huge history. Then we licence just 2 big banks couple of years ago and then move on tap to allow same big bank applicants  which were ignored 2 years ago!

It is not as if India did not have small banks. Infact, much of Indian banking history is basically around Indians starting their small banks as British large banks did not serve their interests. However, post 1969 the thinking has been large banks can do both the jobs of maintaining personal relations and growth. Now again we are revisiting the old ideas but ignoring the old banks which pioneered all these ideas for many years.

Much of banking and finance keeps going in circles. Hence, a historical perspective is important. Perhaps at the end of the day it is the only thing that matters..

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