The Hindu Business Line : `At least one big ticket bank merger likely this year'

THE Indian banking industry is likely to see at least one consolidation in the current financial year. The merger, when it happens, is likely to be either between banks in the South or between banks in the western region, said Mr H.N. Sinor, Chief Executive, Indian Banks' Association.

"Consolidation is like a tide and it cannot be stopped. The Government has given plenty of indication that it is in favour of consolidation," said Mr Sinor.

Banks will benefit from consolidation, as it will facilitate better use of capital, saving on technology cost, staff retention through adequate compensation like voluntary retirement schemes and savings on infrastructure cost, Mr Sinor added.

He was speaking at the sidelines of a seminar organised by IBA and Oracle to explore new profit avenues for the banking industry. It is important for banks to know their customers. By knowing their customers' needs banks can retain them and increase their profitability, Mr Sinor said.

Mr V.K. Ramani, President, UTI Bank, said, "Growth has made banks data rich, but we must also know how to use data to our advantage." UTI Bank implemented Oracle solutions for transfer pricing and profitability analysis in 2003-04. This helped the bank to identify areas of profitability and identify what steps to take in order to meet targets.

Citing an example of how technology helps increase profitability, Mr Ramani said after the bank started promoting its mobile banking service on the ATM network, against the traditional method of mailers, the number of requests for the service went up from 20,000 to 70,000. The number of calls at the bank's call centre, asking for details of the statements of accounts also reduced, he added.

The trick is to know how to use the data in several ways, said Mr Alan Payne, Vice-President, Financial Services, Asia-Pacific, Oracle Corporation. For instance, the same historical data used for budgeting, can also be used for forecasting the likely profits of the company.

"Technology can also help to know if a product can be profitable in future, even if it is loss-making now," he added.

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`At least one big ticket bank merger likely this year'