The Hindu Business Line : Bank mergers

This refers to the article "When banks merge and emerge bigger", (Business Line December 10). While the idea of merging six to seven financial behemoths is fine, there is also the incidence of bailouts. At such times, the merger works better after implementation of reforms.

Mergers also ensure protection for uninsured creditors of banks in the event of risks, because of which banks tend to take more risks, resulting in resource allocation problem. When one is aware that some element of credit could generate risk, then prudence in investment would be the order of the day, and unbundling of credit into various baskets would begin.

Nalin Rai

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