The Hindu Business Line : `PSU bank mergers yes, but not now'

THE RBI Governor, Dr Y.V. Reddy's recent remarks at the Bank Economists' Conference may have sparked off a fresh debate on mergers and acquisitions among Indian banks, but public sector banks do not see any such moves towards consolidation in the immediate future.

Several top bankers in PSU banks felt that though the need for larger size and the consequent economies of scale should be seriously debated by the industry, concrete moves towards mergers between public sector banks may take place only after three to five years.

In fact, keeping in view the ramifications of large-scale consolidation within the public sector fold, the Chairman and Managing Director, Canara Bank, Mr R.V. Shastri, suggested that the Government and the RBI consider setting up a panel to study the implications and chalk out a policy roadmap specific to the issue.

"Economies of scale have to be looked into soon. It is time some thinking goes into this. I feel some mergers within the public sector fold would happen but only in the medium term. Since this (M&As) would have wide ramifications, my suggestion would be that an expert committee be set up to look into all the aspects," Mr Shastri said, adding that these were his personal opinions. Mr Shastri is also the Deputy Chairman of the Indian Banks' Association (IBA), which had organised the Bank Economists' Conference (BECON).

In what is seen as holding a message for the next big phase of banking reforms, the RBI Governor had voiced his concerns at the conference about the lacunae in the legal and regulatory framework on consolidation among banks and had suggested a broad policy framework for the purpose.The Chairman and Managing Director, Oriental Bank of Commerce (OBC), Mr B.D. Narang, too felt that it might not be an easy job to merge public sector banks. "It will take some years for this to happen. Each bank has a different culture and mergers might not be that easy. I would say the issue should be debated by each bank once the technology platform has been upgraded and the excess staff redeployed," Mr Narang said.

The Chairman and Managing Director, Indian Overseas Bank, Mr S.C. Gupta, felt increasing competition would compel banks to look at mergers and acquisition in the years to come. "The writing is on the wall. Circumstances will compel you to consolidate or perish. But when it will happen is anybody's guess. Maybe I would have retired from the industry by then," said Mr Gupta, who has a residual tenure of nearly four years.

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`PSU bank mergers yes, but not now'