The real agenda of the government in merging banks is to help big corporates as consolidation of the banks will not result in recovery of huge bad loans, said a top official of the All India Bank Employees' Association (AIBEA).
Opposing the merger of 10 public sector banks into four, C. H. Venkatachalam, General Secretary of AIBEA, in a statement issued here said in the name of banking reforms the government is enabling banks to help corporates.
Venkatachalam said that last fiscal the public sector banks posted a gross profit of Rs 150,000 crore. Owing to the provisions towards bad loans, there was a net loss of about Rs 66,000 crore.
According to him, the merger of banks will not result in recovery of bad loans. On the contrary, the merger of five associate banks of the State Bank of India has resulted in increased bad loans.
Pointing out at the Punjab National Bank, that failed to detect the Nirav Modi fraud, Venkatachalam wondered how banks when they become bigger could monitor effectively.
The government on Friday announced a mega plan to merge 10 state-run public sector banks into four large entities to address economic concerns.