Free 800 words essay on BANK MERGERS: ADVANTAGES AND DISADVANTAGES for school and college students.
Bank mergers are big affairs, with deals clocking in at a few billion rupees. All banks, big and small, aim to acquire or be acquired by other banks, and these often happen at quite an accelerated rate. So why do banks merge? The reasons vary, from greater customer reach and more profits, to a search for better management. Mergers also take place as the final resort to keep a financial institution from going under.
No matter how big the merger or what the stature of the participating banks, there can be no doubt that a merger is a big step, and sectors beyond the financial world are affected by such a move. Here, let’s take a look at the advantages and disadvantages of a bank merger.
Let us start off with the advantages.
Positive effects of bank merger.
IMPROVEMENT IN FINANCIAL HEALTH
Mergers between banks naturally reduces the competition between banks, with financial rivals joining hands and providing less options for the general public to choose from. Naturally, this will mean higher profits for the banks. Reach with be greater, with the customer base expanding to accommodate the customers of all participants in the merger. Operational costs come down automatically, and multiple posts are abolished, resulting in considerably higher savings and profits.
BETTER CUSTOMER SERVICE
With the merging of banks, customers are provided fewer options to choose from, so there is lesser hassle in deciding among scores of banks providing similar services with little to no variation. Customer service also improves dramatically with the best of technological and other resources being adopted in the course of the merger.
SECULAR TRADE UNIONS
The trade union of each bank has its own demographic of cultural and social domination. With the trade unions of both banks coming into equal play with a merger, such domination is most likely to vanish, and the interests of the general public and all employees of the bank will be taken into account in its demands.
IMPROVED ORGANIZATIONAL CULTURE
With a bank merger, employees are likely to get posted across the various branches. This intermingling of cultures will promote secularism in the workplace, along with the reduction in provincialism. With the adoption of the best of the workplace culture of all participating banks, work life is also going to be become much better. Besides, a bigger workforce and modified administration, with new members in the higher ranks will mean that there will be very little chance of any favoritism in the industry.
IMPROVEMENT OF OPERATIONS
Each branch, and the bank on the whole, will be welcoming fresh blood into its system, which will increase the chances of introducing fresh ideas that will lead to betterment of the banking system. Higher savings, as discussed before, will also lead to the scope of utilizing that money in improvement of the infrastructure and training and development of employees.
Increased savings and higher earnings will translate to better wages and services for the employees. Besides, with a merger, new positions will open up and further training will be provided, which will help the existing employees seize the opportunity of climbing up the success ladder. New positions will also create jobs in the employment market as a whole.
However, mergers do come with their downsides.
Negative effects of bank merger.
Despite new positions being created, a considerable number of positions will be abolished with the merger, resulting in a huge number of people becoming redundant. Besides, with staff from all participating banks coming under the same banner, there will be surplus staff at many branches, which will lead to transfers in previously understaffed branches, usually in remote locations. This will trigger widespread discontent.
Number of bank branches will certainly increase after a merger, which will make it all the more difficult for the head offices to regulate and monitor all activities. Besides, the different workplace cultures coming into contact is bound to cause some clashes in the beginning before they begin to adapt and cohabit. Most importantly, a merger will bring the best and the worst of both banks together, which means weaknesses of the banks will also initially get adopted into the system before they can be weeded out.
There is always a risk of alienating the customer base during a merger. First of all, there is the trepidation about the security of money, especially in those days when cyber-crimes are rampant. Secondly, banking policies may change, along with technological platforms, and that may not go down well with the total customer base, especially with long term and elderly customers, who often react emotionally to such changes. Banks must be prepared to lose some customers during such a transition.
Irrespective of the difficulties they pose, bank mergers are inevitable because the benefits far outweigh the risks. It is up to the banks to stay strong and engage better HR personnel and core banking staff to ensure that the difficult times are tided over smoothly.