The Hindu Business Line : GTB crisis

The episode relating to the Global Trust Bank should provide the occasion for a rethink on the Reserve Bank of India's banking licensing policy. India is over-banked today, either in terms of the number of banks or branches or such criteria as the population covered per branch.

It has the largest network of branches in the world. The direction should be one of consolidation and not further expansion.

This is particularly relevant in view of the trend towards what may called branchless banking through such media like ATM, internet, etc.

In the case of ICICI Bank it is reported that more than half of the customer transaction is done outside the branch.

This trend will gain further strength in urban and metropolitan areas, which provide the major proportion of business to banks.

Consolidation has helped the Japanese banking industry which faced the problem of Non-Performing Assets after the bursting of the `Bubble'.

Between 2001 and January 2003 there were mega-mergers of big banks resulting in assets for the consolidated banks ranging from $741 billion to $1.3trillion.

If Mitsubishi Tokyo Financial Group merges with UFJ Holdings the result will be a banking behemoth with assets of $1.7 trillion and it will be the largest bank in the world replacing Citibank.

The merger is expected to combine the healthy and strong balance sheet of MTFG with the extensive outreach of UFJ in small business lending and consumer loans.

A. Seshan

Tokyo

Letters to the editor and contributions can be sent by e-mail to:bleditor@thehindu.co.in

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