Opinion Lead the way

None of these considerations operate here. The public sector banks have the public as minority shareholders who obviously are not in any position to drive any of the agenda. For the government,the decision to merge any of the banks with another is purely administrative.

But,for the employees of the banks including their chairmen,the stakes are more substantial and clearer. For the chairman and managing director,it is the painful choice of relinquishing his power,if not his designation. Down the line,the bank employees have often made it clear what they think of consolidation,like the strike called on Wednesday. For them the worry is the extent to which they could lose their seniority vis a vis the other bank staff. Sixteen years after New Bank of India was merged with the Punjab National Bank,the staff still stand classified on that basis,informally.

So while it is quite easy for the finance ministry to issue an order anytime asking any combine to be formed the chances of making that entity work out the way one would expect a large player on the block to operate,is bleak. The existing management team will be so beset with the problem of removing the obstacles that will spring up as two extremely reluctant groups of company officials move together with the same badge,they will have little time to pick up the opportunities from the new business space.

The employees at no public sector bank have any understanding of the working pattern of their competitors. Bank officials do not move out to other banks till they come up to the level of executive directors,which is on an average around the age of 50. The only time everybody does come together on a semblance of common ground is at the negotiating table for wage revision,every five years. It is only the State Bank group which has instituted common practices for everyday banking,from investments down to the mundane ATM rules,which makes the group look more cohesive now. That steam too gathered momentum,only when the current chairman of SBI,O.P. Bhatt with a long assured innings,walked in. But the rank and file of other banks are quite disparate in millions of things in their banking practices. At a time when the RBI governor has said the Indian banks will now face more competition,this is then a dangerous foundation to build the larger banks.

It is in this context that we need the leaders to drive the process. The finance minister has to seriously consider co-opting charismatic leaders to drive the consolidation process in at least the first set of banks that are taken up for mergers or consolidation. The government has been consistently pushing home the point that consolidation in the sector has to be led by the banks. The government would only act as the facilitator. That position has to change to make the plans really come together. Way before any of the banks are brought into a single unit when the government gets a cabinet approval for the passage of a couple of bills redrawing their status as independent units,the role of the chairman designate has to start.

That person must be appointed to the bank who will lead the consolidation process,even before the partner is identified,and immediately move to battle. That battle will be to win over the employees’ confidence about the merger,moving on at the next stage to win the loyalty of the employees of the bank that is expected to be merged. Since no one else will drive the agenda,(as I said,it is not a shareholder or company driven plan) it is his persona that will create the degree of confidence. This radical approach is essential. There is no point believing that an effective merger can be made possible by an incremental approach,almost assuming that the staff will not notice the difference the day after the merger.

It isn’t my point that a charismatic leader cannot be selected from within the current crop of bosses in the public sector banks. But it will be a dangerous game to wait for the merger to happen before offering the prize to one of them. The leader will simply not enjoy the level of credibility that is required to drive the new company. The approach is essential because it is his or her vision that will shape the new entity. This will take time but that is the reason to start off right now,when the government has the lead time in its hand to support the plan.

In fact,given the humongous challenge of the project,it might be better to bring in an outsider. The government as the largest shareholder can jolly well do so. The appointment itself will be a signal of the intent to change and he can take a lucid view of the changes at each level that will be needed. Otherwise we will change the symbols but very little else that will work in the new banks.

The writer is Executive Editor (News),‘The Financial Express’

subhomoy.bhattacharjee@expressindia.com