Explore M&A options, Centre tells PSU banks

Heads of five PSU major banks — Punjab National Bank, Bank of Baroda, Canara Bank, Union Bank of India and Oriental Bank of India — attended the meeting called by Additional Secretary GC Chaturvedi last night here.

“It was a pure consultation meeting where views were put together on what are the challenges or issues in bank consolidation. One view was that on the lines of the Narasimham Committee report, it is better to have four large banks in the country that have international presence,” said Union Bank of India Chairman and Managing Director (CMD) MV Nair.

It is also learnt that banks supported the idea of greater size and scale to meet the growing fund requirements of corporate India for overseas acquisitions. “If consolidation happens, it will be for the good of the industry. It will lead to banks with bigger size and scale in the country. However, it should be looked at on a case-to-case basis,” Bank of Baroda CMD M D Mallya said. Canara Bank chairman and managing director AC Mahajan said, “we have given our views. They are interested to know what are the issues likely to arise. We have shared with them what are the issues.”

Apart from the merger of State Bank of Saurashtra into the parent company SBI and the plans of another subsidiary — State Bank of Indore — for the same, not much is happening on the consolidation front of PSU banks currently. PSU banks should have larger size to take on foreign banks which would have much greater participation in the domestic market from this year.

Earlier this year, the Finance Secretary Ashok Chawla had said there was need for PSU banks to look for mergers and acquisitions in the next 5-10 years to achieve optimum economies of scale.

The small size of Indian banks could be gauged from the fact that the country’s largest lender is ranked 57th in the world in terms of assets by the England-based leading banking publisher, The Banker. It ranked 363 among Fortune 500 companies list in 2009. However, the bank improved its position in recent times in these two lists.

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