State-owned Union Bank of India, which is amalgamating Andhra Bank and Corporation Bank with it, hopes to reap cost benefits of over Rs 2,500 crore through rationalisation of branches and savings on technology on the combined entity. The amalgamation of the three banks, which will be effective from April 1, is part of the government's mega consolidation of 10 public sector banks to create four global-sized lenders, beginning next financial year.
Union Bank said implementation of all the processes under amalgamation will happen without much disruption to customers and employees of Andhra Bank and Corporation Bank. "There will be revenue generation due to cost cutting on account of branch rationalisation and also on the technology side. We are looking at more than Rs 2,500 crore of synergy benefits in the next three years," Union Bank of India's Managing Director and CEO Rajkiran Rai G told in a telephonic interview.
The combined entity will have 9,500 branches and 12,000 ATMs across the country.
"Of the 9,500 branches, we have identified 700 plus branches that will be rationalised because of the proximity, but it will not happen immediately. Maybe around 300 branches will be rationalised in the first year," Rai said.
The capital adequacy ratio of the combined entity will be at 12.5-13 per cent, while gross NPAs and net NPAs stand at 14 per cent and below 6 per cent, respectively.
The amalgamation will create an employee base of 75,000, of which 37,000 are from Andhra Bank and Corporation Bank put together. Rai said the technology integration is likely to take one year.
"By September, Corporation Bank will get integrated and Andhra Bank by December. After that it will take three more months for on boarding of net banking and mobile banking," he said, adding that there is some slowdown in few processes owing to the lockdown but the bank is working around to deal with those issues.
He said harmonisation of human resources has been completed and the board has approved all the products, processes and policies for the amalgamated entity.
"I want to give comfort that there will be minimum disruption or zero disruption for customers and staff," he said.
The interoperability for basic banking services like fund transfers, cash deposits for the customers of Andhra Bank and Corporation Bank has already been put in place.
Rai further said there was a plan to introduce new loan products for customers of the amalgamated entity but it has been postponed to avoid hassles for customers and staff who are already facing challenges due to the 21-day lockdown amid the coronavirus outbreak. "Due to the situation which has evolved over the past one month, some of the things, particularly on the advances side, have been postponed a bit. So we have told them (Andhra Bank and Corporation Bank) that they can continue with their old products for now," he said. MSME and retail borrowers of Andhra Bank and Corporation Bank will, however, will be able to avail loans under the emergency credit facility set up by Union Bank to provide additional liquidity to customers affected by COVID-19.
Also, the benefit of reduction in repo rate by the Reserve Bank of India will be passed on to all the customers of the amalgamated entity, he said.
On the deposit side, customers of the three banks will be offered the same products from the start, he said.
He said some of the departments of the combined entity may be relocated to utilise the headquarters of Andhra Bank and Corporation Bank at Hyderabad and Mangalore, respectively.
"We are seriously thinking of relocating some of the departments like digital banking, audit and inspections and some of the departments from the operations side to use the headquarters of the two banks," Rai said.
A few residential and commercial properties of Andhra Bank and Corporation Bank have been identified and they will also be disposed of gradually, he added.