Union Bank: As a merged entity, we can face this lockdown better

Union Bank of India will become the fifth largest state-run bank after Andhra Bank and Corporation Bank merge with it on April 1. Six banks are being merged with larger peers to get economies of scale. In an interview to Joel Rebello, CEO Rajkiran Rai explained how he planned to go about integrating the three and what business would look like post-merger and Covid-19 shutdown. Edited excerpts:

We are in an unprecedented situation. How do you go about this when there’s a national lockdown?

Having announced and done all the legal process, I don’t think that postponing it would have been a good thing because the six banks, which are being merged, would have come to a standstill. Stalling it in March when share swaps were announced, and all things were at an advance stage was not advisable. Many of their MDs are also retiring next quarter and we would have wasted three to four months if we had delayed. As a merged entity, we are better capitalised and take-off won’t be an issue. As a combined entity, we are in a much better position to handle this unprecedented event because of our larger capital base, branch network and better teams to handle.

But few factored in the Covid-19 breakout?

The challenges from Covid-19 would have been there anyway. Today we are not transferring staff or changing any technology platforms. So there is no difference for the frontline staff or for customers because changes will happen gradually. Even without factoring this event, we are adequately capitalised. We are yet to assess this event and the extent of its damage. We can only do that after the event is over. Even raising capital from market will be assessed only after this event is over.

There are talks about shutting down some branches…

We have identified more than 700 branches which can be rationalised. Particularly, in cities we have branches next to each other or in the same building. This will take three years. In the first year, we are looking at rationalising more than 300 branches. We will also open fresh branches. We will open regional offices in new centres like Amritsar, Bhagalpur and Mau. If there is an opportunity for more branches, we will open more. This acquisition will make us one of the strongest banks in south India with more than 30% market share in Andhra and Telangana with every third customer being ours. I will have more than 2,000 branches in these two states. We will leverage our presence in the south which complements our strengths in north and west India.

What do these banks bring to Union apart from branches and people?

We will strengthen our gold loan, which is a business we never did. We also add to our MSME portfolio in the south with our better underwriting process. We will also deepen our corporate relationships because of our stronger capital base and larger size. We have already identified places where we can open mid-corporate branches. So business should be better.

Will the branch rationalisation lead to job cuts?

I don’t think we have excess manpower as of now. Our recruitment is also on track because every year, we are recruiting to replace the retiring people. Our total strength will be 75,000 compared to Union Bank’s 38,000 now. Rationalisation of administrative officers and branches will give me some manpower to be redeployed in other verticals.

How will things change for customers immediately?

On the deposit side, we have normalised interest rates across the three banks. On the advances side, the new borrowers of Andhra and Corporation Bank will get a lower rate as much 20 bps in some slabs. After the RBI’s rate cut on Friday, rates will further come down from April 1. Gradually their customers will migrate to Union Bank’s centralised platform which will help with faster turnaround time. Our back office teams were working together during this period. So we were well prepared.

How soon do you think it will take to fully integrate the IT systems of the banks?

For Corporation Bank, it will take six to nine months while for Andhra Bank it will take nine to 12 months because Corporation Bank is in the same Finacle 10 platform but with a slightly older version. So it will be upgraded sooner. Andhra Bank is on Finacle 7. We have started some exercise and are trying to integrate it within 12 months. There will be no change in account numbers for customers even after the platforms merge. Credit and debit cards will be issued by Union Bank only after they expire.


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