India needs 4-5 banks the size of SBI, says Finance Minister Nirmala Sitharaman
Addressing Sitharaman said, “Even before the pandemic, a driving force for amalgamation (in the public sector banking sector) was the need to scale up banking. India needs a lot of banks, but too many big banks.” ” Indian Banks’ Association (IBA) Annual General Meeting (AGM) here. However, he did not say whether further consolidation of public sector banks was on the cards.
“Amalgamation is an important exercise because of the way economies are shifting into completely different planes. (and) also, because of the way the economy and industry are differentiated for growth in the post-pandemic era.” We are looking at ways. Banks should think about the immediate and long-term future,” he said.
The process of consolidation in the public sector banking sector began in April 2017 with the merger of SBI’s five associate banks and Bharatiya Mahila Bank. After this, in April 2019, Dena Bank and Vijaya Bank merged with Bank of Baroda.
Then came a massive consolidation exercise in April 2020: Punjab National Bank (PNB) took over Oriental Bank of Commerce and United Bank of India. In addition, Union Bank of India assimilated Corporation Bank and Andhra Bank; Indian Bank absorbed Allahabad Bank, and Canara Bank took over Syndicate Bank.
The latest example of consolidation in the banking sector was in November 202o when the Indian subsidiary of Singapore-based DBS Bank acquired ailing private sector lender Lakshmi Vilas Bank (LVB).
The Finance Minister also said that some economically active areas of the country still lack banking facilities, and banks should use digital maps to bridge the gap and ensure services when the economy recovers.
He said that IBA should play a leading role in the exercise to overcome these shortcomings. Banks have the option to decide which locations need a banking presence through a brick-and-mortar model and where a direct presence should help.
Sitharaman said, “Digitalization has saved a lot of cost for the banks even without compromising on the services provided by the banks. There is no need for competition among banks for presence. You can serve customers even without physical presence.” can.”
Talking about efforts to clean up the books of banks, the Finance Minister said that National Asset Reconstruction Company (NARCL) and Debt Resolution Company have been set up. They must be able to remove, restructure and sell non-performing assets. “It’s a formulation that has saved us from copying something that everyone dislikes, at least in the name of ‘Bad Bank’.”
“This combination is not a bad bank as the process is driven by a banking system which has a sense of clearing the books quickly. Banks today have less burden because the books are clean and as a result, they are able to raise money from the market, ” she added.
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