5 steps customers must take when banks merge

Here is how you should deal with a new merged entity with respect to your savings accounts, loans and fixed deposits.

Don’t panic, your money is safe

All stakeholders need to understand the context of a merger first. It is in the interest of the customers, the banks and definitely the economy of the country. Ajit Venugopalan, Managing Director, SVC Bank (SVC Co-operative Bank) says, “There is no reason to panic. When banks merge, sufficient care is taken to ensure that the impact on customers is minimal.”

A retail banker requesting anonymity says, “The money in PSU banks is absolutely safe, with or without a merger.” We have already seen that nothing really impacted customers during the SBI and associates consolidation as well as the merger of Dena Bank, Vijaya Bank with Bank of Baroda.

As the boards of individual banks approve the mergers, there will be official announcements and procedures communicated by your bank through emails/letters for the transition of savings/current accounts, locker facilities, fixed deposits, loan accounts, etc. with the new bank (merged entity). Around the time of such merger announcements, there are possibilities of fraud emails being circulated; so stay alert and don’t share your account details, internet banking ID and pin, etc. to any unknown/phishing emails.

Get your updated account details

The bank mergers announced will set a number of changes in motion that you will have to be prepared for in the near term. Adhil Shetty, CEO of BankBazaar says, “To start with, your account number and customer IDs, as well as the associated IFSC codes may change. If you have accounts with more than one bank, especially the merging banks, then the two accounts may be allotted a single customer ID.” So, while you may not need to redo your know-your-customer (KYC) exercise, do make sure your email ID and mobile number are updated with the bank so that you receive all official intimations on allotment of new accounts instantly.

Eventually, new account numbers, customer IDs, and IFSC codes mean that you would have to update these details with various third-party entities including the income tax department for tax refunds, insurers to get maturity proceeds, mutual funds to get the redemption amounts, etc. Shetty says, “You will have to submit fresh mandate forms of auto-debits for mutual fund investments and for loan equated monthly installments (EMIs).” It’s recommended that you make a list of all the financial accounts you hold, including loans, insurance policies, mutual funds, etc., so that you do not miss out on updating them when the time comes.

Internet banking facility may differ

While transitioning, the individual online banking portals of the merging banks may cease to exist and you may be redirected to the merged entity’s portal. However, depending on the new bank’s policies, you may be able to continue using your older credentials (user ID and password) for online banking.

Anil Rego, CEO and Founder of financial advisory firm Right Horizons cautions, “Stay alert while redirecting to new website and confirm you are login to correct bank website for internet banking and not on phishing webpage which may look similar to new bank homepage.”

Says Khushroo Panthaky, Director at Grant Thornton Advisory, “Technology is a prime consideration in a banking consolidation and therefore mergers have been decided considering the technology platforms of the banks. The merged entity would have a much better geographical reach. They would enable penetration and improved financial inclusion.”

Learn about branches and ATMs that may be rationalised

There may also be a certain amount of branch rationalisation, as more than one merging entity may have branches in the vicinity. So, it is possible that some of the branches will be closed resulting in disruption of locker facilities, as also some of the ATM outlets being reshuffled etc. You should closely watch the communication received from the banks in this regard.

Existing debit and credit cards will continue to be valid, until notified by the bank. On the brighter side, customers will be able to access ATMs of all the merging banks for free for cash withdrawals, balance inquiry, etc. New cards will be issued by the merged bank.

Know the services and charges of the merged entity

After the merger of the banks is complete, it’s advised to know the new bank’s (merged entity’s) free and chargeable services, interest rates for deposit and borrowing, etc.

Says Venugopalan, “The rates of banking services like maintenance of minimum balance or average quarterly balance will be left unchanged for some time at the new bank. However, eventually, these may be charged as per the acquiring bank’s rules and regulations.”

Interest rates on your existing loans and fixed deposits will not change post the merger, unless renewed. It will only be transferred to the merged bank. However, all retail loans will be linked to external benchmarks from October 1, so the new bank will give you the option of shifting to the new interest rate regime on renewal. But, if you opt to continue with the marginal cost of funds based lending rate (MCLR), the loan will be linked to the new bank's rates upon reset.