The Hindu Business Line : PSBs divided over consolidation move

Senior Finance Ministry officials said that the merger talks have led to a clear divide among the PSU banks with the smaller banks expressing their opposition to such moves. The officials said that though in an open forum, all banks may appear to be supporting the Government's proposal for consolidation, closed-door talks reveal a distinct wedge among them. "It is evident that while larger banks are supportive of mergers, the smaller banks are not at all keen," a senior Finance Ministry official told Business Line.

The officials said that the only exception where `smaller' banks may be supportive of a merger are when the person chairing the entity has sufficient years of service left that makes him hopeful of heading the merged entity at a later date. "The biggest fear of those heading smaller banks is of losing the top post. The exception is only in some cases where the CMD has enough years to go and feels that he could one day head the merged bank," the officials said.

The schism between the `big' and `small' appears to have widened ever since the Finance Minister, Mr P. Chidambaram, said at a recent function that the seven of the largest PSU banks would spearhead the consolidation moves. The seven largest banks in terms of assets are State Bank of India, Punjab National Bank, Canara Bank, Bank of India, Bank of Baroda, Union Bank of India and Central Bank of India. That leaves 13 other nationalised banks and seven associate banks of SBI, which could be the target for takeover by the `big seven.'

Mr Chidambaram has repeatedly expressed his desire that consolidation among PSU banks must lead to the creation of a couple of Indian financial powerhouses that could match the largest and the most efficient banks across the globe.

The Government feels that tighter regulatory norms and the challenges of the market dictate that some Indian banks should attain the size that would match that of the global giants. Moreover, the Finance Minister has also asserted that a larger size need not necessarily lead to a bank becoming "distant and less friendly."

Despite the Government's desire to catalyse the merger, the timing of the initiation of the consolidation moves would ultimately depend the Centre's ability to convince the Left parties on the advantages.

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