bank mergers

What customers have to do with bank mergers?

Last month, the Finance Minister announced a spate of bank mergers. This consolidation will bring down the total number of public sector banks (PSBs) in the country to 12 from 27 in 2017. The question on everyone’s mind is how this will affect customers & what action customers need to take for a smooth transition.  There is no reason to panic. When banks merge, sufficient care is taken to ensure that the impact on customers is minimal.

The FM announced the merger of PNB with Oriental Bank of Commerce & United Bank of India, Canara Bank & Syndicate Bank, Union Bank of India with Andhra Bank & Corporation Bank and Indian Bank with Allahabad Bank.

As the boards of individual banks approve the bank mergers, there will be official announcements and procedures communicated by your bank through emails/letters for the transition of savings/current accounts, locker facilities, fixed deposits, loan accounts, etc. with the new bank (merged entity). Around the time of such merger announcements, there are possibilities of fraud emails being circulated; so stay alert and don’t share your account details, internet banking ID and pin, etc. to any unknown/phishing emails.

To start with, your account number and customer IDs, as well as the associated IFSC codes may change. If you have accounts with more than one of the the merging banks, then the two accounts may be allotted a single customer ID. Make sure your email ID and mobile number are updated with the bank so that you receive all official intimations on allotment of new accounts instantly.

Eventually, new account numbers, customer IDs, and IFSC codes mean that you would have to update these details with various third-party entities including the income tax department for tax refunds, insurers to get maturity proceeds, mutual funds to get the redemption amounts, etc.

While transitioning, the individual online banking portals of the merging banks may cease to exist and you may be redirected to the merged entity’s portal. However, depending on the new bank’s policies, you may be able to continue using your older credentials (user ID and password) for online banking.

There may also be a certain amount of branch rationalization, as more than one merging entity may have branches in the vicinity. So, it is possible that some of the branches will be closed resulting in disruption of locker facilities, as also some of the ATM outlets being reshuffled etc. Existing debit and credit cards will continue to be valid, until notified by the bank. On the brighter side, customers will be able to access ATMs of all the merging banks for free for cash withdrawals, balance inquiry, etc. New cards will be issued by the merged bank in due time.

After the merger of the banks is complete, it’s advised to know the new bank’s (merged entity’s) free and chargeable services, interest rates for deposit and borrowing, etc. The rates of banking services like maintenance of minimum balance or average quarterly balance will be left unchanged for some time at the new bank. However, eventually, these may be charged as per the acquiring bank’s rules and regulations.

Interest rates on your existing loans and fixed deposits will not change post the merger, unless renewed. It will only be transferred to the merged bank. However, all retail loans will be linked to external benchmarks from 1st October 2019, so the new bank will give you the option of shifting to the new interest rate regime on renewal. But, if you opt to continue with the marginal cost of funds based lending rate (MCLR), the loan will be linked to the new bank’s rates upon reset.

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Sabyasachi Paul has been associated with equity research and advisory on equity markets in India for over 10 years & currently heads the equity research desk of Eastern Financiers Ltd, Kolkata. He also manages a portfolio on the online platform Kristal. Find link to the strategy named ‘The Tortoise’

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