Letters: Banking on consolidation

This refers to the report “Is Chidambaram’s plan to create big banks feasible?” (December 28). In the 2008 global financial crisis, biggies like Lehman Brothers and Bear Sterns – which suffered huge losses and even faced bankruptcy – were investment banks dependent on deposit-taking banks, and not deposit-taking banks themselves. Most big deposit-taking banks (such as Citibank and J P Morgan) in Britain and the US survived. On the other hand, roughly over 165 small banks failed in the US in 2008-09. Overall, the impact of the global recession was not as severe on deposit-taking banks as on non-deposit-taking banks in the West. Big banks can give big loans, harness big deposits and attract capital-infusion easily (Industrial and Commercial Bank of China had the largest initial public offering in the world). As is rightly pointed out, State Bank of India, the “big daddy” of the Indian banking sector, has to become still bigger to funnel the growth story of India — for which the first step would be to merge all its subsidiaries.

Ravi Kant Mumbai

Letters can be mailed, faxed or e-mailed to:
The Editor, Business Standard
Nehru House, 4 Bahadur Shah Zafar Marg
New Delhi 110 002
Fax: (011) 23720201
E-mail: letters@bsmail.in
All letters must have a postal address and telephone number