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Tuesday, June 02, 2020

How the public bank mergers could affect you

There’s no need to panic if your bank has been merged with another. However, keep these crucial pointers in mind to avoid any issues later.

Written by Adhil Shetty | Published: September 23, 2019 6:14:01 pm
Public Sector Banks Merger: Full List of Merged Banks in India Nirmala Sitharaman announcing the public bank mergers. (Source: PTI)

Union Finance Minister Nirmala Sitharaman recently announced a mega merger of Public Sector Banks to bring down the total number of state-owned banks in the country. This is, however, not the first time in recent past when public sector banks have been merged. While the country’s largest bank, the State Bank of India, merged with its sister entities in 2016, Vijaya Bank and Dena Bank merged with Bank of Baroda in April 2018.

In the current round of mergers, 10 public sector banks will be merged to form four bigger banking entities. Post the recent announcement by the government, Oriental Bank of Commerce and United Bank will merge with Punjab National Bank, Syndicate Bank will merge with Canara Bank, Andhra Bank and Corporation Bank will merge with Union Bank, and Allahabad Bank will merge with Indian Bank.

If you hold an account in any one or more of the banks mentioned above, you don’t need to get worried due to the mergers. That being said, you’d be well-advised to keep some important points in mind.

Impact on savings accounts, loans, and fixed deposits

The new entities may change the interest rate for a savings account as well as for the fixed deposits and new loans. However, if you have a loan with a bank based on the MCLR, it’s interest rate may remain the same until its reset period. Later, the interest rate may change according to the new MCLR rate.

As per Reserve Bank of India’s directive, all the banks have to link their retail loans to the repo rate from October 1, 2019. So, you may get an option to switch to the new repo rate-based loan as well.

On the other hand, your existing FDs will continue to provide you returns with the initial interest rate. However, on maturity, the corpus will be transferred to your account held with the newly-merged entity.

Impact on account number, cheque book, address and other details

If your bank has been merged with a bigger bank, the name of your bank and account may get changed. However, you’ll get a proper intimation if that happens. You can continue to use your existing cheque book until the merger of the bank gets completed or till the new entity issues a cheque book.

The bank may operate by clubbing into a single branch; therefore, your bank’s address may change too. The Indian Financial System Code (IFSC), online banking login and bank’s mobile application may also change after the merger. However, you can continue using the existing debit card and you’ll later get a new debit card from the merged bank.

What should account holders do?

The immediate impact of the mergers may affect your KYC details at various places.

For example, you may have provided KYC as per the details of amalgamating/anchor bank to the Income Tax Department, mutual fund houses, insurance companies, and others. Now, if the new banking entity changes the IFSC code, address, account number, etc., then you will be required to update your details at all the places you have given the data.

If you had registered for an auto-debit facility for services like mutual funds, insurance, or for other investments or payments, you may need to request for the auto-debit again for concerned services. Similarly, if you hold a salary account in any of these merging banks, you may need to update the details of the new bank entity with your employer to avoid any discrepancy in the salary transfer. The best idea would be to make a list of services that are directly linked to your bank account so that you don’t miss out on anything.

The merger of these banks is expected to take several months as the entire process is time-consuming. So, you need not panic and keep track of information that your bank shares with you from time to time. Once the merger process gets completed, you may get the opportunity to bank with an entity which is bigger, better, and more efficient than your previous bank.

The author is CEO, The article has been published in collaboration with BankBazaar. Opinions expressed are those of the author.

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