Bank Merger

The Finance Minister, Nirmala Sitharaman has announced the merger of public sector undertaking (PSU) banks. This move will bring down the number of public sector banks from 27 in 2017 to 12 after merger.

Six Mega PSU banks created as a result of the merger announced on August 31. Image: Bloomberg Quint

As a former banker, I support this move. Existence of multiple public sector banks has been an enigma for me. These banks existed once as private sector banks. They competed then and played a role in the Indian economy. Their nationalisation in 1979 made them all public sector undertakings. Having banks in every nook and corner of the country was one of the reasons cited behind bank nationalisation. The idea was to make banking accessible to the poor and financial inclusion. As it was said then, to change from class banking to mass banking.

However, this still does not seem to have been achieved. Payments bank have been started up to achieve the same goals. However, these end up serving the same urban populace as private banks in India where the money is. All this achieved was make competition in urban areas, where the money is, more stiff.

Private banks and payment banks are able to provide better service and better loan recovery because of the targeted nature of their banking. They work in areas where they have competence and knowledge.

Success in universal banking cannot be measured with the yardsticks used for class banking of the private banks. Universal banking is by its nature very intensive, involves high wastage and is highly inefficient.

The merger of these public sector banks makes more staff available to them. These can be deployed in rural centres to meet the shortfall of staff branches face whilst in urban centres to meet the shortfall of loan processing and servicing staff.

It would take at least a generation before enough private banks spring up to target various parts of universal banking. Some will still not be viable. As various government policies push towards formalising the economy, many of these private banks will merge to form larger banks.

As for public sector banks, ultimately, I hope that there is only one public sector bank. Perhaps, two. State Bank of India will definitely be one of them. Union Bank has a nice ring to the name if there needs to be another bank which is a union of all other banks other than State Bank. Eventually, I hope everything is merged into the State Bank. In the meanwhile, processes need to be streamlined, documentation needs to be standardised and loans need to be recovered.

Will there ever be a time when India will not have a need to have any public sector bank?

View from the Frontline

On November 8, Indian Prime Minister Narendra Modi announced on national television, the Government’s decision to scrap old 500 and 1000 Indian currency notes. He declared that while these would be accepted at hospitals, petrol pumps and a few select places, they would cease to be legal tender from that midnight on. The following is my personal experience sitting in the frontline counter handling public in the last four days.

I had reached home, had my evening snacks and was going to settle down for a quiet evening with my wife when a WhatsApp (that harbinger of news) notification from Pranav alerted me to the news. I didn’t believe him. To which he asked me to turn on the television.

The television reportage ensured that the people panicked overnight. No reporter seems to know (or frankly, care) about what was accurate. Online, people were debating the merits and demerits of the news rather than what would happen on the ground. How do you pay for milk, dhobiwala or even the wada pav in one or two days, once the current stash of cash was over. There were rumors about GPS chips on currency notes to find hidden cash and about how the government was to roll out the new currency notes. Luckily, banks would be closed for the public on the next day. It gave the banks some breathing space to down ATM shutters, remove 500 and 1000 currency notes in bank vaults and prepare for the upcoming storm to hit the banks.

We waited for instructions from superiors, cash was moved out, stationery was ordered and retired personnel were called back in to meet the unexpected surge in customers on the next day.

The next day (Thursday) there was a surge in panic and people came in huge numbers. In the long queue outside my branch, they would not let me in, asking me to stand in queue. I informed them that I was a bank employee and I would be needed indoors for the queue to move. At the open of business hours, people standing in queue without tokens reminded me of the days when I used to sit in my mother’s bank when banking happened in bank ledgers and paper. People were confused and had questions about exchange of money and the newly set withdrawal limits. There were people trying to deposit money in small accounts, PPF accounts or any account that would deposit their money. There was confusion about whether they could deposit money anywhere they wanted or only in their home branches. Some customers from other banks also wanted to know if their money could be deposited. The confusion showed that the information flows through the media (especially regional and English newspapers) was not good enough. We worked for extended working hours handling the rush of customers on that first day. We tried to remain calm and work through the situation as fresh instructions continued to pour in. Customers from nearby stores got us water. Traffic policemen bought in a bottle of Frooti and there were rare instances of shared brotherhood among people in the queues that restored my faith in humanity.

The second day (Friday) that the banks opened for work, the line swelled. Rumors spread by people who did not get their money changed on the first day led to more panic. Also, depositors added to the lines leading us to temporarily suspend other bank business. This day we began to see more understanding customers. They waited calmly in lines. The banks also provided enclosures and drinking water to people outside after news of deaths of at least 2 people waiting in queues. This day we had to turn a deaf ear to people pleading for more money than 4000 in exchange and more than 10000 in withdrawal daily limits set in place. Many people needed the money to fulfill their daily requirements, to pay fees, for marriages and birthday parties and hospital emergencies. Some private hospitals continued to refuse to accept 500 and 1000 notes despite the Government allowing them to.

Saturday began with confirmation of some of the things we heard from customers on the previous day about hospitals not accepting the scraped notes. Banks were to be closed for an extended 3 day weekend. The news meant that this would be cancelled and banks would work for normal working hours on Saturday and Sunday. While customers knew that banks would remain open they did not know that the banks had returned to normal working hours. We continued working till about two hours after closing hours and later that day operationalised the ATM machine. Coupons were given for entry on the next day while the lines stayed for accessing the ATM. I found the air removed from my bike while returning home after a long day’s work. I had it refilled from a nearby tyre shop and was on my way home around 8 that night.

My back pained in the night and my wife massaged my back before I could go to sleep to get ready to get back to work for the eighth straight day.

Sunday was much better because both customers and staff knew what was happening – all the rules were now clear. We had lesser interruptions of people asking us about the rules, verifying what they had heard from other bank officials and people. The line ran more smoothly. On this day, they were also aware of the working hours and hence people paced themselves or made alternate arrangements from banks and branches that were less crowded.

I guess we were part of a wonderful team effort, colleagues helping each other out, officers standing behind their staff and handling situations when they sometimes got out of hand, police members working long hours handling customers and the customers themselves waiting patiently and behaving with extraordinary restraint. There were lessons for me in pacing myself, learning patience, learning a new job (have not sat in cash for such a sustained period of time) and being a part of a team.

It was wonderful to think back on the last four days, resting at home today and thought I’d share it with all of you. A rare glimpse of the scene from the people who manned the counters.


Currency Notes

Yesterday, the Indian Prime Minister announced that the ₹500 and ₹1000 notes will no longer be legal tender from midnight of November 8-9. The reporting in the media and forwards on social media (especially WhatsApp) created a panic situation at Bank ATMs and several retail outlets.

Since I’m on the cash counter I’ve been trying to read all the stories appearing in old media before I see the circulars later today at the bank.

Deepak Shenoy over at Capital Mind has the best write up on the topic, calmly explaining the availability of money over the next few days, why it’s not really the end of the cash economy, no GPS chips and why we may have only temporarily brought the black money count to zero.


When we mention digital banking today, what comes to mind are mobile apps and internet banking facility provided by our bankers. DBS, a bank from Singapore, changed that by launching Digibank. It applies the term to banking from end to end.

I read about digibank first on Twitter via ads while a tweet from  @sengupta made me want to try it out:


It kept the whole concept vague when it launched. When you download their app, you realise the badassity of the idea. When you first download their app, you get to use it as a wallet, like you would use Paytm’s offering. It then offers you a steep incentive to upgrade this into an account by paying a steep 7% interest when you convert the wallet into an account. Then you can walk in to any Café Coffee Day coffee shop and confirm your identity via a biometric authentication process through the Aadhar database.

The first hindrance it removes is the tedious task of visiting a bank with a form filled up Digibank.pngonline and KYC documents. Here you just walk in to a Café Coffee Day outlet that is open from 11 AM to 11 PM with your mobile phone that has a code on it! The bank also saves tremendously on manpower costs. For the customer, visiting a less formal atmosphere like a coffee shop is less of a hassle than visiting a bank branch during business hours. He/she also probably saves a holiday.

The second hindrance it removes is all the paperwork. eAadhar enables authentication of a customer without him having to take any documents at all. With the data that the customer fed into the app and by taking required permissions, the bank can probably just download the information from the eAadhar platform and the Income Tax website. Imagine the paper that can be saved by saving the paper used for  the accounting opening form and the photocopies you had to get for a traditional bank.

The third hindrance it removes is the use of a smart assistance to remove waiting for banks to open to get your problems resolved. If the inbuilt smart assistant does not resolve your problem, it gets transferred to a real person. Technology and AI can actually handle most issues that customers approach a bank with.

That said, being a new thing, there will be teething issues and problems that need to be resolved. My authentication did not work. I don’t know what was the problem. But I was happy that when I wanted to close my account, they did it quite quickly and then sent me an email once that was done.

However, this is how I hope banking will be done in the future. From your device and from your homes.