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ICICI Bank CEO & MD K V Kamath

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Bandyopadhyay: Two years back Bank of India tried to tie the knot with Union Bank. Balachandran can tell us more on this....

Balachandran: 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.

Khandelwal: 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?

M Balachandran
To get more people into the banking fold, there has to be an appropriate pricing of deposits

M Balachandran,
CMD, Bank of India

Rao: 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.

Shetty: Consolidation can be based on three specific criteria – regulatory prescription, a voluntary action and the owner’s decision.

Nayar: 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 don’t think we are holding our plans to that. We are committed to growing organically.

V P Shetty

Kidwai: 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.

If 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.

There 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.

We 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.

There are problems of capital, consolidation, long-term debt requirement, skill sets and the best practices

V P Shetty,
chairman, IDBI

Bhatt: 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.

Bandyopadhyay: Let’s have the last word from Rai. The Left parties are watching. Can you talk?

Rai: Of course I can talk and it’s 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.

Bandyopadhyay: 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.

Nayar: 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.

Bandyopadhyay: Thank you all.

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HOME    Business Standard November 2006