How undervalued are Indian banks?
Of The Year
ICICI Bank CEO & MD K V Kamath
Bankers are tweaking their products to attract customers.
Will they bite?
Urge To Merge
The only option left for weak & small co-operative
banks is to merge with bigger peers
Banks bounce back in 2005-06, posting a growth in
net profits and reducing NPAs
All the data you wanted on banks
on Co-operative banks
of PSU, Foreign & Private banks
Two years back Bank of India tried to tie the knot with Union Bank.
Balachandran can tell us more on this....
Without taking cognizance of your statement, all that I have
to say is yes, scaling up of operations organically and inorganically
is very important and we must think in terms of consolidation.
It could be between banks in India or even with an overseas
player. But there are definite issues that need to be looked
into in terms of synergy, technology and HR. I think people
are getting conditioned and now they are trying to accept
it as a matter of fact and going forward.
If one plus one is equal to two then consolidation is not
necessary. It has to be two plus two equal to five. Some bold
decisions are required in terms of manpower and branches of
PSU banks. For too long we have been shying away from discussing
about the rural branches which are in losses for the last
20 to 25 years. Can you swap or sell them without disturbing
the financial inclusion aspect?
get more people into the banking fold, there has to be an
appropriate pricing of deposits
CMD, Bank of India
If a bank gets more than 10 per cent market share through consolidation,
that will raise regulatory issues on monopoly. In America, for example,
no single bank can have a market share of more than 10 per cent.
If the limit is crossed, the anti-trust law comes into force. We
need to see that banks are more viable and more efficient and at
the same time there is enough of coverage, specially when you are
talking of financial inclusion.
Consolidation can be based on three specific criteria regulatory
prescription, a voluntary action and the owners decision.
Voluntary or market-driven, the consolidation process has got to
move along. Along with it, we need some other reforms. As far as
we are concerned, 2009 is just a date when the RBI may open up the
sector. I dont think we are holding our plans to that. We
are committed to growing organically.
I just want to highlight that a bank like ours, which just
25 years or 30 years ago was the size of the State Bank of
India. Today, it is one of the largest banks in the world
in terms of assets. It has grown through consolidation.
we want to see Indian banks among the top 10 in the world,
this is the only way to go. With consolidation will come all
the efficiencies that we have been talking about whether
in technology or in delivery. It is an absolute requirement.
are lots of brides and grooms but no deals. As a student of
M&A, I also believe that a small deal takes as much energy
and time as a large one. We need to think big and act big.
need to address all the processes that are part of consolidation
like people and technology. No work has been done on this
score. So 2009 is still a pipe dream for the country, let
alone for any single entity.
are problems of capital, consolidation, long-term debt requirement,
skill sets and the best practices
All of us know what it takes to do consolidation in terms of HR,
technology and ownership issues. In the State Bank, our task is
cut out. If the amendments to the SBI Act goes through, possibly
we can look to merging some of our associate banks with State Bank.
There has been a lot of talk about nudging from the top to get the
consolidation done. I think we need from outside a push and a shock
to get it done. We have to catch the bull by the horns; 2009 is
knocking at the doors we cannot really wait.
Lets have the last word from Rai. The Left parties are watching.
Can you talk?
Of course I can talk and its up to you to see how much sense
it makes. We have a fragmented banking industry and we need scale.
Consolidation is happening among small private banks. The government
is not opposing consolidation in the public sector banking industry.
We need efficient match-makers who can persuade the groom and the
bride. Once you decide on a merger, the government will extend all
support it but it will not be a top down process.
This brings us to the end of a very stimulating discussion. All
the bankers present here firmly believe that the banking system
can definitely support the growth even though there are issues ranging
from HR, technology and skill to resources, capital and consolidation.
The CEOs are all for consolidation to build the scale. On behalf
of the government Rai has given the assurance that it will support
the consolidation drive.
Tamal, You have not summarised one thing: All of us here said that
it was the right time to initiate the change. The operative word
is to get going.
Thank you all.
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