IDBI Bank keen on consolidation in banking space

Public sector IDBI Bank Chairman and Managing Director Yogesh Agarwal today supported the idea of consolidation in the Indian banking space saying the Union government should play a more pro-active role.

“There is need for consolidation in the Indian banking sector and whenever it happens, IDBI will be at the centre of the activity,” Agarwal said on the sidelines of inaugurating the bank’s fifth branch in Lucknow.

However, he noted that the consolidation will happen only when the Centre actually pushes through the agenda with determination. “Since, the government controls almost 70 per cent of the Indian banking sector, it will have to take the process forward assiduously,” he added.

Agarwal said IDBI (Industrial Development Bank of India) had already merged two banks with itself namely IDBI Bank and United Western Bank (UWB). “The consolidation can happen among government banks, between private banks and between private and government banks,” he said.

He further said Indian banks were adequately capitalised and “no viable project was being denied credit” even in the present phase of meltdown.

“The lending by Indian banks has actually grown by 19 per cent from January 2008 to January 2009 and by almost 23 per cent in FY09. The problem is other sources of funds such as capital market and foreign equity have dried due to meltdown and this has suddenly put immense pressure on banks,” he explained.

“We started lending to small and medium enterprises (SME) last year and our SME portfolio is about Rs 1,500 crore at present. There is a great potential in the sector and we will remain bullish on SME lending,” he said.

Meanwhile, IDBI will open a branch in Dubai by May and offshore branches in Singapore and Beijing will also materialise in this fiscal. IDBI Bank, which already has 514 branches has licences to open another 200 branches in the current financial year.

“By 2012, we aim to create a total network of about 1,000 branches,” he informed. In keeping pace with the expansion, the bank will also hire 2,000-3,000 people in 2009-10. Last financial year, IDBI Bank had hired 2,000 people.