Such merger of banks, instead of addressing their basic problems, will actually result in squeezing the banks’ operational areas through inevitable closure of several branches seriously affecting employment. It also affects the spread and availability of banking services for common people particularly in comparatively remote areas.
The entire state of Kerala is voicing its vehement opposition to the curbs imposed on the cooperative sector following the withdrawal of the Rs. 500 and Rs. 1000/- notes.
Allowing industrial houses to own banks would allow them to corner bulk of the credit for their own businesses through connected lending. It will be impossible to assess risks and regulate the banking sector in such a scenario. Moreover, it will further the concentration of financial power and political influence. It is for these reasons that many countries, including the United States, prohibit industrial houses from operating banks. South Korea prohibited industrial houses from promoting new banks following the financial crisis in 1997.