The Hindu Business Line : M&A in PSBs

This has reference to the news item regarding the proposed strike by bank unions against merger (Business Line, January 8). The approach of the unions is short-sighted and blind to the emerging new challenges. As discussed during the Bancon 2007 last month, size, capital and skill-sets are key elements to face emerging challenges. Unless Indian banks are armed with capital strength and improved skill-sets, foreign banks entering India in 2009 are bound to gobble up the weaker banks, and the so-called rural penetration which unions are taking up as the cause for their fight will still be a distant dream.

It is time there was consolidation among PSBs. Small is not beautiful while competing globally. Chinese banks have grown in size in last 10 years and two Chinese banks are within the top 10 Asian banks. Even SBI is ranked no 11. The market capitalisation of the Industrial and Commercial Bank of China is many times the combined m-cap of all 23 PSBs. If this is the position among peer Asian banks, our PSBs are pygmies when compared to global banks.

It is time mergers and acquisitions take place in banking, especially among PSBs. The argument of unions that even after mergers the size is still incomparable is not tenable.

L. Rangarajan Mumbai

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