Indian Banking System Continues To Implode: First Ever 3 Bank Merger In India, Is This An Indicator of A Bigger Economic Collapse In India?

Courtesy: Daily Excelsior

It is extremely rare for a triple bank merger to occur anywhere in the world.

It brings back the memories of 2008 when RBS, Fortis and ABN AMRO bank decided to do a triple bank merger. We all know what happened immediately thereafter. 

Not only the 3 banks collapsed and had to be bailed out by their respective Govts but it served as a trigger and an advance warning of euphoria, mis-selling of toxic financial products, debt build up, greed, inability of individual and corporations to meet their loan commitments and ended up as a major global financial crisis causing dozens of major banks to fail worldwide.

That crisis is reverberating around the world until this day with more debt, more unemployment etc leading to more bankruptcies globally with falling demand around the world while the world population continues it's ascent on a daily basis creating unbelievable stress on the world economy.

If you see an eerie similarity in today's world of early 2019 with mid 2007, then it is indeed true but just much worse.

Reference: RBS collapse: timeline

These chaotic events always occur over several months or even years just because Govt's do a fantastic job of lying and hiding the truth by "mergers" or "bail outs" and then it gets too late and the public stops believing in the markets or the Govt or both leading to a wider economic collapse.

Based on the above market dynamics, back to the mergers.

Qatar tried to do a triple bank merger but it failed last year. They could only get 2 banks to merge.

Sharjah in UAE tried a triple bank merger. But it led to bail out of 1 bank for more than half a billion dollars (this amount will rise by next week) and 2 others still remain in limbo as time passes by.

Abu Dhabi is currently trying a triple bank merger but it should hopefully go through.

Now, India has got itself to a stage that mergers are happening on an annual basis (which is as fast as possible) given the opposition by trade unions, difficulty due to laws, political opposition and the threat of job losses.

Can this triple bank merger be an advance indicator of a wider economic collapse across India?

We have all heard that how many Indian billionaires have run away from India or are in jail and how many millionaires have run away or taken new citizenships or Permanent Residency of various countries just over the past 4-5 years or how more than 9,000 companies are undergoing a bankruptcy process towards a shutdown. 

All of this is a very good indicator of the internal collapse of the business in India.

This has led to non payment of corporate loans, slowness in business, weak consumer confidence, massive job cuts, terrible real estate market conditions, surge in crime, major tax issues for foreign investors since Govt is running out of cash etc. 

In addition, the launch of 5 layered and the most cumbersome GST in the world and currency demonetization hurt everyone across the board badly in India including the importers abroad or shippers or oil companies. 

India has seen declines in imports of crude oil as well as vegetable oil hurting even foreigner suppliers.

An ungodly number of 9,000 applications or higher now are in the newly created bankruptcy court of India brought upon by outstanding creditors against all sorts of companies. 

Some petitions will be cancelled, some will be resolved and some companies will go insolvent. 

If we assume just 20%-30% go bankrupt that's a lot of damage to the economy because only those will go into liquidation who are large and have a very large bad debt and have a weak business outlook with no buyer.

Most people know how difficult it is to start a business in India and then to survive. 

Just ask Nokia, GM or Vodafone. 

Or Emaar, Norway Telecom or RBS/ABN AMRO Bank.

Or if you prefer, you may ask Reliance Telecom, Kingfisher Airlines, Nirav MODI Diamonds or Gitanjali Jewellery.

Mar 2018: Over 9,000 cases under consideration of NCLT: Govt

Just today, news has come that INR 80,000 crores (USD 11.5bn) may have been received by the lenders. This amount is too small. This is the bad debt from just 1-2 billionaires that is being recovered from hundreds of smaller businesses.

NCLT helped creditors recover Rs 80k crore: FM Arun Jaitley

As a prelude to the future of the Indian economy, this week, the Indian Govt approved the first ever 3 bank merger that will close on 1 April 2018. 

It is easy to do such a merger because all 3 banks are owned by the Govt but is very scary because first the Govt weakened SBI by adding 5 failing banks and now Govt is adding 2 failing banks to the 2nd largest bank of India, by assets, Bank of Baroda.

Same thing happened in USA in 2008 when US Govt forced JP Morgan to take over and "merge" with Washington Mutual and Bear Stearns (both failed enterprises).

Merger of Dena Bank, Vijaya Bank, BoB an all-round losing game

Cabinet approves the merger of Vijaya Bank & Dena Bank with Bank of Baroda

Courtesy: ET

Courtesy: ET

Courtesy: ET

In addition, Bank of Baroda and SBI (2 of the largest banks of India) plus a few other Govt owned banks are on a major overseas branch and subsidiary shutting down spree since 2017. 

This indicates losses, frauds and the risk of being caught by foreign regulators as has happened in South Africa and many other countries for India and is quite shameful for India on top of the multi million dollar losses.

30 Nov 2017: Bank of Baroda to shut Hong Kong branch, Thailand office

Bank of Baroda was busy doing money laundering for an Indian family who in partnership with ex-President of South Africa have been siphoning billions for a few years now.

Govt caught them and the bank ended up being shut.

If you don't believe us, you can read this article here:
Best of 2018: Bank of Baroda SA only existed because of Gupta money laundering   

12 Feb 2018: Bank of Baroda confirms closure of South African branches

17 Dec 2018: Bank of Baroda to shut three African branches by June

In early 2017, India also merged 5 subsidiary banks into SBI which is the largest bank of India which had 5 separate subsidiaries who could not handle the stress of bad loans and had to be merged with the mother bank (SBI) after several decades. 

This indicates the level to which Govt will go after 4-6 decades to prevent a bank run or a bank collapse and merge several "failing" banks with a very large bank to avoid disclosure and attempt to hide the facts and prevent a bank closure.

SBI merger with five associate banks from 1 April

During 2018, approx. 100 overseas branches have been shut by the Indian banks.

1 Mar 2018: Government shuts down 35 overseas branches of PSU banks; 69 more offices under review for closure

28 June 2018: SBI to close 9 overseas branches; PSBs collectively shut down 35 foreign operations

26 Aug 2018: PSU banks plans closure of 70 overseas offices during this fiscal

Customers are not going to lose but imagine one of the Top 2 banks by assets (Bank of Baroda) of any major country having to liquidate its operations, withdraw the license of it's subsidiary and giving up all its clients in a foreign country (Ghana).

Bank of Baroda from India was established just in 2008 in Ghana (pop. 29 m) and already has exited from Ghana in 2018.

How does India plan to support its diaspora worldwide or it's citizens within India to grow when it’s topmost banks are collapsing or merging or withdrawing from cities worldwide?

Expect same in 2019 with more branch closures around the world forcing Indians to deal with local banks wherever they reside as the footprint of Indian banks will continue to shrink at the fastest rate under the current administration in India, both within India and abroad.