Time not ripe for mergers: Chakrabarty

A week after the government met select public sector bank chiefs to discuss consolidation, Reserve Bank of India Deputy Governor KC Chakrabarty reiterated again that the time was not ripe for such a move.

“We have very few dominant players and consolidation will further enhance the problem. Financial inclusion is more important than consolidation,” he said on the sidelines of a conference here on Wednesday.

Earlier, he had made a statement to this effect.

This is, however, the first statement from the banking regulator, since finance ministry officials met the heads of Punjab National Bank, Canara Bank, Bank of India, Bank of Baroda and Union Bank of India earlier to discuss a possible road map for the consolidation proposal.

A few state-owned bank heads even made statements that they had identified a few smaller banks as potential merger targets.

While bank consolidation has been on the government’s agenda for several years, it could not go ahead with its plans due to political opposition.

Even now, officials said, the proposal was only at a discussion stage, though the intent was to set up eight to 10 large banks, instead of having 27 competing public sector banks.

Going forward, the government intends to hold consultations with smaller banks and employee unions before finalising a road map.

At the meeting, bankers had said that geographical spread and technology were the factors that should be borne in mind while deciding on merger candidates.