Red flag from unions — Oppose new plans for public sector bank mergers

Core Viewpoint - India's bank employee unions oppose new public sector bank mergers, citing concerns over financial inclusion, employee morale, and customer service [1][3][5] Group 1: Government Plans and Proposals - The government is considering restructuring state-run banks, potentially merging Union Bank of India with Bank of India, which would create the second-largest state-run lender by assets [2] - Other proposed mergers include Indian Overseas Bank with Indian Bank, and potential privatization candidates include Punjab & Sind Bank and Bank of Maharashtra [2] - No formal announcement has been made regarding new mergers, but discussions are ongoing within the finance ministry [6][7] Group 2: Union Perspectives - Union leaders argue that India's banking system has significant room for expansion, especially in rural areas, and that consolidation is premature [3][4] - Previous mergers have led to operational disruptions and decreased accountability, with a call for more effective banks rather than larger ones [5] - The decline in service quality and competition due to reduced numbers of public sector banks is highlighted as a concern [9] Group 3: Analyst Opinions - Some analysts advocate for consolidation, suggesting it could provide economies of scale, optimize costs, and enhance profitability for public sector banks [10][11] - Merged entities could streamline operations, invest in digital transformation, and improve competitiveness against private and foreign banks [12] Group 4: Historical Context - The consolidation of public sector banks began in 2017, with significant mergers occurring in subsequent years, reducing the number of public sector banks from 27 to 12 [13][14] - The largest private sector merger in 2023 involved HDFC Ltd merging with HDFC Bank Ltd, creating the largest private lender by market capitalization [15]