Business Daily from THE HINDU group of publications
Monday, Sep 22, 2008
ePaper | Mobile/PDA Version | Audio | Blogs
Business Daily from THE HINDU group of publications Monday, Sep 22, 2008 ePaper | Mobile/PDA Version | Audio | Blogs |
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Opinion
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Editorial
Venerable banking entities overseas are increasingly becoming easy prey for takeovers but buying them will require large and deep pockets. The absorption of State Bank of Saurashtra by the State Bank of India has finally taken place quietly. That in itself is a welcome development given the recent acrimony between the managements and the employees unions that opposed the merger. Till last month the deal seemed uncertain in view of the unions’ intransigence. Happily, all the stakeholders consented to a comprehensive merger of not just balance sheets but of “head and hearts”. The most obvious question now is the fate of the other associate banks. While State Bank of Mysore, State Bank of Travancore and State Bank of Bikaner and Jaipur are partly publicly held, the other three, State Bank of Hyderabad, State Bank of Indore and State Bank of Patiala have expressed interest in merging but the SBI has no plans so far in that direction. Interestingly, however, the Chairman, Mr O. P. Bhatt, did talk of overseas acquisitions; if that is a serious option, the government will have to create some enabling conditions before the largest bank can foray into the increasingly turbulent global market. For a start, any acquisition under the present conditions will require large doses of capital given the increasing sickness of many banks. The largely government-owned banks have constraints in overseas expansion, so SBI even with its relatively large capital base may find the going tough. Venerable banking entities overseas are increasingly becoming easy prey for takeovers but buying them will require large and deep pockets. As it is, Indian public sector banks are still coping with issues related to capitalisation under Basel II norms. Admittedly, SBI will be able to tap debt markets to raise funds but with a tightening and sceptical credit market in the West, that route may become more difficult. The best bet would be to tap domestic equity but then the government would have to part with some of its holding to allow the bank elbow room. Just how feasible that possibility is at this juncture is debatable. But the present parlous state of global banking entities is conducive for such a mission given the fact that Indian banks so far, do not appear to have caught the contagion. Not many PSU banks would have the bandwidth for global acquisitions at this stage but the Finance Ministry could do worse than consider just how they can acquire the wherewithal. Indian banks can think global like their industry counterparts. The main hurdle is capital, an impediment that the banks could overcome with a little help from the RBI. Now the Government can do its bit for the banks by letting go a little more. No plans for merging other associate banks as of now: SBI SBI, State Bank of Saurashtra merger Cabinet okays SBI, State Bank of Saurashtra merger Global Trade Finance, SBI Factors merger likely More Stories on : Editorial | Banking | State Bank of India
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